Russia may be able to call up enough of its own fleet of tankers to evade G7’s oil price cap, bringing in roughly the same amount of revenue as before the cap, Reuters reported Friday.
Group of Seven (G7) wealthy democracies agreed to enforce a lower price for Russian oil by Dec. 5 in a bid to stifle Moscow’s main source of revenue and hamper its efforts in Ukraine. However, industry leaders and a U.S. official say the plan, which involved a ban on insuring or financing Russian fuel shipments above a certain price level, could backfire if Russia is able to summon its own ships and secure new export destinations, according to Reuters.
“In theory there is a big enough shadow fleet to continue Russian crude flows after Dec. 5,” Andrea Olivi, global head of wet freight at commodities trading giant Trafigura told Reuters. These vessels would not need international insurance, allowing them to evade the price cap, Olivi added.
New forecasts show that Russia’s oil export quantities may remain largely unchanged if it flouts the price cap, Reuters reported.
Russian President Vladimir Putin pledged in September to cut off energy exports to Europe if the G7 chose to move forward with the price cap.
Up to 90% of Russian oil could flow through service providers not covered by the price cap, a U.S. treasury official who spoke on the condition of anonymity to discuss sensitive topics, told Reuters. The U.S. has already seen Russian ships changing their countries of origin beyond the G7, the official added.
Russia could lose out on just one to two million barrels per day (bpd) should it choose not to comply with the price cap, Reuters reported.
Russia exported seven million bpd in September, according to Reuters. Skirting the price cap would cause some financial difficulties for Russia but could also slash global supply by 1% to 2%, raising prices at the pump. (RELATED: The West’s Scheme To Slash Russian Oil Profits Could End Up Backfiring)
Should it be able to muster Indian and Chinese ships as part of its “shadow fleet,” Russia’s December exports could fall by just 600,000 bpd, JP Morgan told Reuters.
“Oil traders dealing in Russian oil are no longer in Switzerland, Geneva or London. They are more coming out of the Middle East,” Norbert Rucker, head of economics and next generation research at Swiss wealth manager Julius Baer, told Reuters.
“If you look at the Asian buyers of the oil, the ships, the insurance — this seems to be increasingly done out of Asia,” Rucker added.
The price cap we announced today serves our dual goals of diminishing Putin’s revenue and his ability to wage war against Ukraine while mitigating high energy costs in America and globally. pic.twitter.com/ELapYKSDAt
— Secretary Janet Yellen (@SecYellen) September 2, 2022
India and China have declined to say whether they would endorse a price cap, as they already purchase Russian oil at steep discounts since existing U.S. and European sanctions against Russia have already cut off much of the country’s oil supply to the West, Reuters reported. A price cap could further suppress Russian crude prices, benefiting China and India.
The European Union is set to ban Russian oil imports altogether by the end of 2022.
The G7 and the Russian government did not immediately respond to the Daily Caller News Foundation’s requests for comment.
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