EU Embargo of Russian Oil and G7’s Price Cap Take Effect
Mr. Fishman, who has led the planning and negotiation of international sanctions against Russia at the State Department, said there are some reasons for optimism. One is the recent weakness in the oil market, which he explains means that Russian oil is no longer as important to the market as it was a few months ago. He also said the agreed-upon $60 price is “Goldilocks,” not too high to bring Russia more revenue than it is currently receiving or too low to prevent Moscow from producing oil.
He also said that the cap’s provision to review rates every two months, or more often if needed, offers “flexibility” that has historically helped implement sanctions, such as such as those targeting Iran’s oil sales, worked.
However, there is still much skepticism and confusion about these measures. First, analysts say, data on Russian oil prices has become scarce in recent months. Viktor Katona, an analyst at Kpler, a shipping-tracking research firm, said few if any transactions have been reported and that market-listed prices are “mostly based on rumours.” .
Helima Croft, an analyst at RBC Capital Markets, an investment bank, says that reputable shipping and insurance companies can be spooked by the risks and unknowns of price ceilings and decisions. away.
“Light touch enforcement cues may not be enough to overcome initial discomfort,” she wrote in a recent research note.
The G7 nations – the United States, Canada, the UK, Germany, France, Italy and Japan – have mostly stopped buying Russian oil, so any problems related to a drop in Russian exports could have an impact. More impact on the economies of countries like China and India, major buyers have refused to condemn Russia’s invasion of Ukraine.
The impending embargo and price caps were the main reasons why OPEC and its allies, including Russia, decided to leave their oil production quotas unchanged on Sunday. The group, known as OPEC Plus, seems to have decided that there is no reason to change its policy amid many economic uncertainties, including the faltering economy in China and inflation. Paralyzing global growth is raising fears of a recession.
Many analysts believe that Saudi Arabia, the de facto leader of the group of producers, is looking for a price around $90 a barrel for Brent crude. The Saudis, according to market watchers, are likely to cut output, regardless of opposition from Ukraine and their allies, if prices fall significantly below that level.