The United States Secretary of the Treasury, Janet Yellen, recently told reporters that the G7 price ceiling on Russian oil has not worked as well as the West had hoped it would. According to Yellen, this is due to Moscow’s ability to build shadow services for its oil shipments and the surge in crude prices that has taken the price of a barrel of oil near to $100.
It does imply a reduction in the effectiveness of the price cap, Yellen told reporters on September 29, as quoted by Bloomberg, in what looked to be her first public acknowledgement of the West’s deficit on the matter. Yellen’s comments came after she appeared to be the first public official to admit the issue.
Due to Russia’s involvement in the conflict in Ukraine, the Western world has developed several strategies to restrict Russia’s participation in international markets. One of these strategies is the price ceiling. The goal was to restrict the country’s oil revenue without overtly cutting its crude exports, which, if disrupted, could have an adverse effect on global supply. Sanctions have had the direct effect of rerouting crude oil exports from Russia, which are still taking place, away from Europe and towards Asia, with India being a significant beneficiary of this shift.
Initially, the price cap was in force when a barrel of crude sold for less than $70, and Russia granted additional discounts to buyers.
However, during the past few months, global crude prices benchmarked against London-based Brent have been soaring dramatically, topping $95 per barrel this week because Russia and Saudi Arabia reduced their daily production by 1.3 million barrels. The G7 had placed restrictions on existing businesses, preventing them from providing insurance, transportation, and other services to Russia’s oil industry. On the other hand, Moscow had grown its insurance, shipping, and other service industries.
It was claimed earlier this week that Indian oil buyers, Russia’s largest and most loyal customers ever since the Ukraine conflict began, paid closer to $100 per barrel for Russian crude oil.
Russia May Restrict Grey Oil to Western Europe, the UK and the US
This week, Russia’s government prohibited the export of petroleum products such as petrol, diesel fuel, mazut, and other similar goods. The restriction will continue to be enforced indefinitely until the domestic market achieves equilibrium between supply and demand, at which point prices will stabilise.
It is important to highlight that grey import refers to purchasing petroleum goods on the local market to resell them internationally. Even though this activity does not violate any laws, the government has decided to stop it anyhow since they believe it is one of the factors contributing to the downward trend in the price of fuel across the country.
Leonid Slutsky, the leader of the LDPR faction and chairman of the State Duma Committee on International Affairs, wrote on his Telegram Channel the volume of petroleum product exports, both direct and indirect, must equal zero in the markets of nations that are not friendly to Russia.
Now more than ever, it is critical to put a stop to the export of any form of alternative fuel. He said it is important to compile a list of businesses that have been granted permission to deal in petrol and, if applicable, other petroleum products derived from petroleum.
He mentioned that it is not a good idea to adhere to the “so-called ceiling on foreign procurement prices for Russian oil,” as it is not in anyone’s best interest.
Regarding price ceilings, according to a decree issued by Russian President Vladimir Putin, it is illegal to sell oil and petroleum products to persons or businesses who support this price restriction. This prohibition applies to both domestic and international customers. It is important to highlight that this only pertains to the shipment of energy resources by sea; the circumstances surrounding the shipment of energy resources through the pipeline are entirely different.
