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The great gamble on the Russian oil price cap -Prashanth Perumal

-The Hindu

The West’s attempt to cut Russia’s oil revenues without drastically affecting global oil supplies may be too fine a balancing act in the longer run

The Group of Seven (G7) countries, the European Union and Australia have imposed a price cap on Russian sea-borne oil to make it harder for Russia to fund its war against Ukraine. Under the plan, which took effect on December 5 , Western companies that dominate the global oil shipping and insurance business will be banned from offering their services to ship or insure Russian oil that is purchased at more than $60 per barrel. The price cap is an attempt by the West to cut Russia’s oil revenues without affecting oil supplies.

It should be noted that since the beginning of the Russia-Ukraine war, the West has been trying to limit Russia’s energy revenues. At the same time, since Russia is a major oil producer that contributes more than 10% of overall global supplies, the West has been wary of imposing sanctions that could cause oil supply from Russia to fall steeply and send oil prices shooting up. In fact, it is estimated that crude oil prices could rise to as much as $200 per barrel if oil supply from Russia were to be disrupted by Western sanctions.

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