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In a world grappling with energy crises and geopolitical tensions, the G7’s introduction of a price cap on Russian oil has been a topic of intense debate. Initiated in June 2022 and implemented last December, this policy emerged as a response to the EU’s plan to prohibit companies within the bloc from any involvement in shipping Russian oil. The G7’s strategy allowed non-member nations like India and China to continue importing Russian oil, but only at prices below $60 per barrel, provided they used G7-registered shipping and insurance services. This bold move aimed to leverage Europe’s maritime dominance to compel Moscow into accepting lower prices while keeping Russian oil in the global market. Assessing the Price Cap’s Initial Impact The policy initially appeared to hit the mark. Russian crude prices plummeted as Moscow was forced to redirect its exports to a smaller pool of buyers, primarily in India and China, who gained significant bargaining power. Between December and June, Urals crude, Russia’s primary export blend, traded between $40 and $50 per barrel, significantly lower than global benchmarks. This price drop was a direct result of the G7 policy, which disrupted traditional trade routes and market dynamics. However, as 2023 unfolded, the scenario began to shift. Data from the Kyiv School of Economics highlighted a rebound in the average export price Russia received for its crude, surpassing $80 per barrel by September and October. This resurgence indicated a weakening in the effectiveness of the G7’s price cap. Benjamin Hilgenstock, an economist at the KSE, pointed out the diminishing impact of the energy sanctions and the escalating issue of price cap violations, casting doubt on the long-term efficacy of the G7’s strategy. Challenges and Prospects for Tighter Enforcement Despite the recent upswing in Russian crude prices, the US maintains that the price…

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Filed under: News - @ December 5, 2023 9:22 pm