The West Mulls Stricter Sanctions As Russia Easily Circumvents The Oil Price Cap

By Tsvetana Paraskova of OilPrice.com

The European Union is considering toughening up the sanction enforcement on evaders of the price cap on Russian oil, almost none of which now trades below the ceiling of $60 per barrel, the Financial Times reported on Tuesday.

The price cap mechanism set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil.  

But Western officials are increasingly concerned that Russia is selling nearly all of its crude above the price cap.

“Almost none” of Russia’s crude shipments in October were executed below the cap, a senior EU government official told FT.

“The latest data makes the case that we’re going to have to toughen up,” the official said. 

“There’s absolutely no appetite for letting Russia just keep doing this.”    

In the past weeks, EU officials have discussed tougher sanction enforcement, according to FT.

Last month, the United States took a tougher stance on the sanctions against Russia and sanctioned two vessels for violating the price cap.

The U.S. is also reportedly working to further clamp down on price cap evasion.

The U.S. Department of the Treasury has requested information from ship management companies about 100 tankers it suspects of violating Western sanctions on Russian oil, Reuters reported this week, citing a source who has seen the notices the Treasury has sent. 

As a result of the stricter sanctions enforcement, shipping rates for transporting Russian crude have surged, traders have told Reuters.

Earlier this month, Russian government data showed that the average price of the flagship Russian crude grade, Urals, was $81.52 per barrel in October 2023. That’s higher than the average Urals crude price for the same month of last year, $70.62 per barrel.