Western governments are struggling to meet the challenge of reducing Russia’s oil export revenues, as the impact of their boycotts is offset by higher prices and purchases elsewhere. By establishing a cartel of buyers to impose a price cap on Russian crude, the West could achieve its goal with the support of oil importers around the world.
STOCKHOLM — Western sanctions against Russia for its aggression against Ukraine are getting tougher. The main outstanding concern is how to reduce Russia‘s oil revenues, which could now account for more than half of its export earnings. The best method is an oil price cap, which is already being implemented – but not by Western countries.
The initial idea was that the West would stop importing Russian oil. But since Russia accounts for around 11% of global oil production, Western attempts to reduce oil imports from Russia have led to sharp price increases on the world market, allowing Russia to get more from its exports. of oil, while delivering lower volumes.
Some countries, including India, China and Turkey, have increased their oil imports from Russia. But they didn’t necessarily help Russia much, because they bought that oil at a huge discount. At the start of 2022, Russian Urals crude was being sold at a slight discount of $1-2 per barrel to the European standard Brent. Since April, however, that discount has hovered between $31 and $36 a barrel. On August 3, the price of Ural crude oil was $76 per barrel.
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