Price cap on Russian oil: how will it help Ukraine?

According to Bloomberg, all G7 countries plan to impose a ban on maritime transportation of Russian oil and oil products worldwide. 

These services will be allowed only if the “black gold” will be purchased at the established price cap.

According to Dmytro Goriunov, senior economist at the Centre for Economic Strategy (CES), the G7 countries have already stopped or limited the purchase of oil from Russia, or are in the midst of this process. The question is whether the countries currently buying Russian oil will join the initiative: China, India and Turkey.

“There have been no such precedents in history, – Dmytro Goriunov comments on the G7 decision, – There are cases of banning oil sales in Iran and Venezuela or limiting trade only to the minimum vital needs for food and medicine in the case of Iraq. But an individual price for a particular country has not yet been introduced anywhere in the world“.

“Theoretically, limiting the price of Russian oil can have a very strong impact on the Russian Federation, as 38% of the Russian state budget revenues this year should come from the oil and gas sector,” Dmytro Goriunov said. However, according to the expert, the exact figures of the aggressor’s losses depend on the possibility of introducing such a cap in general and the specific parameters of such agreements.

The desired effect of sanctions is to deprive the aggressor of the opportunity to finance the war. However, Dmytro Goriunov reminds us that the Russian Federation still has a lot of money. Hence, sanctions are a means of additional pressure on the aggressor rather than a tool to deprive it of its physical ability to fight.

The article was published in Ukrainian.