A cap on Russian oil prices will limit revenues for Russia’s “illegal war in Ukraine,” the US says. The cap, approved by Western allies on Friday, aims to stop countries from paying more than $60 (£48) for a barrel of Russian crude at sea. The measures, which are expected to go into effect on Monday, will increase Western pressure on Russia for aggression. Ukraine said the ceiling proposed by the West should be halved. Russia said it will not supply countries that implement it. The price cap was put forward in September by the G7 group of industrialized nations (the US, Canada, the UK, France, Germany, Italy, Japan, and the EU) in a bid to hit Moscow’s ability to finance the war in Ukraine. In a joint statement, the G7, the European Union, and Australia said the decision was taken to “prevent Russia from profiting from its war of aggression against Ukraine”.
US Treasury Secretary Janet Yellen said the price cap would also further constrain Russian President Vladimir Putin’s finances and “limit the revenues he’s using to fund his brutal invasion” while avoiding disrupting global supplies which could send petrol prices soaring around the world. “With Russia’s economy already contracting and its budget increasingly stretched thin, the price cap will immediately cut into Putin’s most important source of revenue,” she said in a statement. Kremlin spokesman Dmitry Peskov said Russia would “not accept” the price cap, adding it was analyzing the move, Russian news agencies reported. British Prime Minister Jeremy Hunt said the UK would not waver in its support for Ukraine and would continue to look for new ways to “restrain the flow of Putin’s money”. The agreement on the price cap is also due on December 5, just days before the EU-wide ban on Russian oil imports by the sea comes into effect.
A price cap, which is expected to affect oil exports worldwide, should complement this. Countries that agree to the G7-led policy can only buy oil and petroleum products that are shipped by sea and sold below the price cap. Ukraine’s Western allies also plan to deny insurance to tankers transporting Russian oil to countries that do not adhere to price caps. This makes it difficult for Russia to sell oil above that price. Leonid Slutsky, a senior Russian politician, told the TASS news agency that the EU is endangering its energy security with the cap. Russia will undoubtedly feel the effects of this measure, but the blow will be partially softened by moves to sell oil to other markets such as India and China, which are currently the largest single buyers of Russian crude oil.