One year after the G7-backed Russian oil price cap took force, a new report noted it has been largely unsuccessful in its goal of slashing Moscow’s fossil fuel revenue, citing insufficient monitoring and enforcement as some of the primary reasons Russia has continued to rake in billions in profits.
The oil price cap has cut Russia’s oil export profits by 14%, or by $37 billion, since it first took force last December, according to the report published Tuesday by the European think tank Centre for Research on Energy and Clean Air.
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But the majority of those reductions were concentrated in the first half of the year, leaving the impact “far short of what could have been achieved,” according to the report’s authors.
That’s primarily due to a lack of enforcement for oil price cap violators, Russia’s stepped-up use of illegal tankers to transport its oil, and the "refining loophole" by which Russian crude is purchased, refined, and sold to the European Union and other countries that have banned seaborne imports of Russian crude.
To implement the oil price cap more effectively, the report’s authors recommend slashing it in half, down from $60 per barrel to just $30, and imposing stronger penalties on violators.
The recommended $30-per-barrel cap would have reduced Russia’s revenues by 49% compared to the 14% reduction Russia is experiencing, according to CREA.
The report comes as U.S. and EU leaders are weighing stronger methods of enforcement for the cap, including cracking down on third-country shipments of refined Russian oil products and making good on the threat of imposing sanctions on violators of the cap.
The United States and other coalition members published an advisory in October outlining best practices for shippers and reiterating their ability to punish any shippers that use Western service providers while shipping oil above the price cap, which stands at $60 per barrel for Russian crude and $100 for refined Russian petroleum products, such as gasoline or diesel.
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Since then, the Treasury Department has imposed sanctions on price cap violators, including, most recently, three United Arab Emirates-based shippers and vessels.
The European Commission is also weighing new reinforcement measures in its sanctions package, including adding new export control mechanisms and authorities for vessels that pass through the Black Sea.