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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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The West Mulls Stricter Sanctions As Russia Circumvents The Oil Price Cap

  • Nearly none of Russia’s oil is currently being traded below the oil price cap enforced by the G7 and its allies.
  • The European Union is considering ways to reinforce the price cap while the U.S. has stepped up efforts to enforce it.
  • Despite Russia’s ability to avoid the price cap, higher freight rates and the falling price of Brent have dragged Russian oil prices lower recently.
Russia

The European Union is considering toughening up the sanction enforcement on evaders of the price cap on Russian oil, almost none of which now trades below the ceiling of $60 per barrel, the Financial Times reported on Tuesday.

The price cap mechanism set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil.  

But Western officials are increasingly concerned that Russia is selling nearly all of its crude above the price cap.

“Almost none” of Russia’s crude shipments in October were executed below the cap, a senior EU government official told FT.

“The latest data makes the case that we’re going to have to toughen up,” the official said. 

“There’s absolutely no appetite for letting Russia just keep doing this.”    

In the past weeks, EU officials have discussed tougher sanction enforcement, according to FT.

Last month, the United States took a tougher stance on the sanctions against Russia and sanctioned two vessels for violating the price cap.

The U.S. is also reportedly working to further clamp down on price cap evasion.

The U.S. Department of the Treasury has requested information from ship management companies about 100 tankers it suspects of violating Western sanctions on Russian oil, Reuters reported this week, citing a source who has seen the notices the Treasury has sent. 

As a result of the stricter sanctions enforcement, shipping rates for transporting Russian crude have surged, traders have told Reuters.

Earlier this month, Russian government data showed that the average price of the flagship Russian crude grade, Urals, was $81.52 per barrel in October 2023. That’s higher than the average Urals crude price for the same month of last year, $70.62 per barrel.  

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But this month, the price of a barrel of Urals shipping out of Russian ports has retreated to levels close to the G7 price cap after higher freight rates and falling Brent crude prices dragged it down, Reuters has calculated.  

By Tsvetana Paraskova for Oilprice.com

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