UK AND G7 ALLIES CONSIDER LOWERING CAP ON RUSSIAN OIL EXPORTS

The UK and its G7 allies are contemplating a reduction of the current cap on Russian oil export prices, deemed ineffective by experts. The existing limit of $60 per barrel is under scrutiny following a significant downturn in the global oil market, which recently saw prices plunge to $59.77 per barrel, marking a four-year low.

Initially implemented in late 2022, the price cap aimed to curtail the revenue Moscow could allocate towards its ongoing military efforts in Ukraine. However, as the international oil landscape shifted dramatically, analysts have concluded that the cap has become largely irrelevant. Russia has effectively found ways to bypass the restrictions, utilising loopholes and a shadow fleet of older oil tankers to continue selling its crude oil at competitive market prices.

Current estimates suggest that while the cap applied to nearly half of Russia’s maritime oil shipments at its inception, about 80% are now sold at rates above the cap’s threshold. Clayton Seigle, a senior fellow at the Center for Strategic and International Studies in Washington DC, remarked that the G7 should consider tightening the cap to below $60 as a method of exerting pressure on the Kremlin.

Market analysts emphasise that such a move could be facilitated without concerns regarding a shortage in global oil supply. The recent fluctuations in oil prices, exacerbated by a trade war initiated by the United States, have led to fears of an impending global economic recession, which could negatively impact energy demand.

Tom Keatinge, a director at the Royal United Services Institute, has urged a reevaluation of strategies aimed at limiting Russia’s income from hydrocarbons, suggesting that the current measures are failing to achieve the intended outcomes.

The UK government is actively consulting with international partners to explore options that ensure the effectiveness of the price cap while supporting Ukraine’s position in the ongoing conflict.