Bloomberg: Russian oil price cap is not working, new sanctions are needed
3 January 10:22
Setting a price ceiling on Russian oil was an innovation in economic policy, but it no longer works. The West needs to change the scale of anti-Russian sanctions and improve their enforcement. This is stated in an editorial by Bloomberg, reports Komersant ukrainskyi.
As wrote, before Trump’s return, Biden is ready for tough sanctions against Russia. Bloomberg believes that, like previous decisions to ease restrictions on Kyiv’s use of American weapons, such a step would be belated, but still desirable.
Bloomberg’s editorial board emphasizes that in order to negotiate an end to the war, Western democracies must first strengthen Ukraine’s position. In addition to military support, the most powerful signal of determination would be to limit Russia’s oil and gas revenues, which in 2023 accounted for almost a third of the federal budget.
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How it doesn’t work
The authors of the article point out that Russia is probably the most sanctioned country in the world. At the same time, it has also become the most skillful in circumventing sanctions. Armenia, Georgia, Kazakhstan, Kyrgyzstan, and other former Soviet states have become transit hubs for Western luxury goods. At the same time, China is helping to support the Russian military machine by supplying raw materials, microchips, and parts for drones.
The biggest failure, according to the editorial, has been the oil price cap. While the scheme initially worked and limited sales to less than $60 per barrel, Russia quickly adapted. russia has gained access to a “shadow fleet” of hundreds of vessels that rely either on non-Western marine insurance providers or self-declared “confirmations” of compliance with the price cap.
The publication emphasizes that attempts to strengthen enforcement have proved to be either telling or ineffective. China, India and Turkey are actively engaged in refining Russian oil into jet fuel and other oil products, which are then legally sold to the EU, the US and other countries.
What to do
According to the editorial, imposing sanctions on more shadow tankers could limit the total number of vessels available to Putin. However, the journalists emphasize that to have a real impact, Western countries will have to target buyers, including refineries and financial institutions.
According to the newspaper, the conditions for this are favorable, as oil prices are holding at around $75 per barrel. However, diplomacy will be a bigger problem. India is already outraged by the need to comply with U.S. sanctions on Iran, and China is demonstrating its readiness to retaliate for U.S. restrictions.
In conclusion, the editorial emphasizes that although sanctions almost always have leaks and circumventions, they have raised the cost of war for Putin. Sanctions provide Ukraine and Western leaders with the necessary leverage for negotiations, and Biden should strive to leave his successor with as many of these tools of pressure as possible.
