Page 4 - AsianOil Week 38 2022

AsianOil COMMENTARY AsianOil

Russian oil price cap proposal is "a

waste of time" and could backfire

The US treasury would be unable to tell whether the price cap was being

adherred to, and it could well backfire for consumers.

RUSSIA THE proposed price cap on Russian oil exports circumvented,” according to Verleger.
by the West is “a waste of time because it can be “Start with the fact that several companies
WHAT: easily circumvented and could be a lose-lose export Russian crude,” he said in a commentary
The G7 group want to strategy for the countries that implement it,” published by Energy Intelligence. “This means
introduce a cap on Philip Verleger, a senior research scholar at Yale that the Russian government cannot easily
Russian oil exports. University, has argued. impose regulations that change the export price
The US Treasury issued “preliminary guid- of its oil. However, the government can tax and
WHY: ance” on the price cap, backed by the G7 group license exports, and it is through its licensing
Yale University research and the EU, in mid-September. It is set to take authority that Russia can outmanoeuvre US and
Philip Verleger warns that effect on December 5 for crude oil transported wider G7 efforts.”
the US treasury would be by ship, in line with the EU deadline for banning Verleger argues that export entitlements that
unable to know whether the import of such trade. It will be extended to are not transparent to the US “are the obvious
the restriction was being the maritime transportation of petroleum prod- way for Russia to obtain prices at or near world
complied with. ucts on February 5, likewise in step with EU levels for its exports.”
embargo plans. The US Treasury acknowledges in its guid-
WHAT NEXT: The aim of the price cap is to keep Russian oil ance that it will need to look out for efforts to
The measure could also supply stable, so that the global energy crisis is evade sanctions, such as “unusually favourable
drive global oil prices to not exacerbated, while depriving the Kremlin of payment terms, inflated costs or insistence on
$150 per barrel. revenue it can plough into its war in Ukraine. It using circuitous or opaque payment mecha-
will work by imposing sanctions on anyone buy- nisms.” It also notes that “seaborne Russian oil
ing, transporting or insuring Russian oil cargoes purchased so far below the price cap as to be eco-
that do not comply. nomically non-viable for the Russian exporter
However, the system can be “easily may be an indication that the purchaser has

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