The ban on russian oil imports and restrictions under the Price Cap Policy (imposing a price ceiling) is an important step in strengthening sanctions pressure on the terrorist state. After all, 80% of russian oil is exported using Western maritime transport services. Nevertheless, serious implications would only occur in the event of more effective restrictions, – believes First Deputy Prime Minister – Minister of Economy of Ukraine Yuliia Svyrydenko.
“The sanctions coalition has once again demonstrated unity and developed a mechanism containing a significant potential to increase pressure on the aggressor state. This is an absolute plus: after testing in practice, the Price Cap Policy mechanism can be applied not only to oil but also to gas, which is already being discussed,” Yuliia Svyrydenko said.
Also, according to the Minister of Economy of Ukraine, a financial ceiling for petroleum products will be announced in February. Türkiye has already started to demand from vessels transporting russian oil through its waters to provide letters of guarantee from insurance companies, which means that the mechanism works.
“russia’s strong negative reaction confirms that we are moving in the right direction,” Yuliia Svyrydenko continued. “However, the decisions made have a drawback. This is an acceptable and generally comfortable level of price restrictions for russia, which will have minimum impact on russia’s oil revenues compared to previous years. And, accordingly, russia’s ability and desire to finance the war in the future. Therefore, Ukraine will work to ensure that the level of price restrictions is revised downwards by our allies as soon as possible. The optimum level that would really hit russia’s oil revenues hard is USD 30-35 per barrel.”
We remind you that on 5 December, the ban on imports of russian oil was introduced by the UK and the EU (earlier such imports were banned by the USA, Australia and Canada). At the same time, the EU’s decision to ban imports does not apply to crude oil imported by pipelines from russia to countries with no viable alternative supply routes in the short term. It also contains a number of exceptions: in particular, for Bulgaria and Croatia.
Simultaneously with the introduction by the EU and the UK of a ban on oil imports on 5 December 2022, a Coalition of Countries (G7, Australia and the EU) introduced a Price Cap Policy for the maritime transportation of crude oil and petroleum products.
According to the decision made by the European Union, imports of petroleum products from russia will also be banned effective 5 February.
The decision on the Price Cap Policy allows providing certain services related to the maritime transportation of russian oil only in the case it is purchased at or below a certain price (price cap or price ceiling). In particular, this applies to:
- Trade and trade mediation;
- Insurance, including reinsurance, of protection and indemnity;
- Services for the provision of flag (registration) of vessels;
- Customs mediation, etc.
The agreed price is USD 60 per barrel as of today, but it can be revised by the Coalition.