0 $
2,500 $
5,000 $
100 $
FEBRUARY 2023

Western Price Cap On Russian Oil Likely To Be Another Spectacular Failure

Support SouthFront

Western Price Cap On Russian Oil Likely To Be Another Spectacular Failure

Click to see full-size image

New non-Western shipping mechanism will emerge since the price cap is implemented.

Written by Ahmed Adel, Cairo-based geopolitics and political economy researcher

The price cap imposed by the West on oil from Russia will actually have negative consequences in the long term as it once again reaffirmed to the international community that Western-centric banking and shipping insurance schemes cannot be trusted as reliable partners.

Western oil sanctions went into effect on December 5, with the European Union stopping all shipments of Russian oil arriving by sea. In addition, the EU, as well as G7 countries and Australia, imposed a limit on the price of oil transported by sea at $60/barrel. The West expects that this will cripple the Russian economy and force Moscow to end its special military operation in Ukraine.

However, this will spectacularly fail.

Sanctions have not instigated an end to the military operation, and in fact they have forced financial mechanisms independent of western institutions to be established. Although the world economic system was already slowly heading towards de-Dollarisation, the anti-Russia sanctions have only sped up the process as important economic players like China, India and Egypt have found methods to bypass western sanctions.

It is recalled that Russia had previously introduced the Mir card system as an alternative to Western financial systems, despite there being a lot of scepticism about it. Now, Mir is being adopted all over the world, and the same can certainly be done in the shipping and shipping insurance industry.

The imposition of an oil price cap has made non-Western countries think about how to break free from Western payment systems and shipping channels. Many countries are already pre-emptively establishing these mechanisms to avoid the same teething problems that Russia has experienced since February 2022.

Washington warned the EU on December 1 that the $52 cited recently for Urals crude oil may not reflect the overall level at which Russian oil has been trading. An unnamed US official has said that Urals has been trading at a $17-$23 discount to crude, which would make it higher than the $52 cited by some media. It is for this reason that the EU set the oil price cap $8 above that cited figure.

For their part, Poland, Estonia, and Lithuania have all voiced their opinion that the price cap on Russian crude oil insured and shipped by Western companies should be set at Russia’s production cost – $20-$30 per barrel. Those levels were dismissed as having very little chance of being supported by other EU members.

The introduction of a price cap on Russian seaborne oil at $60 per barrel is already a risky strategy to begin with and has uncertain results. Therefore, the Polish-Baltic proposal was never going to be approved. Oil market participants were already fearing a $60 cap to begin with, forcing Biden administration officials trying to reassure that the newly agreed cap will not lead to supply disruptions and volatility in the price after it went into effect.

None-the-less, experts fear that “over-compliance” on the restrictions could affect pricing.

“One of the big potential issues is going to be over-compliance, intermediaries deciding that the risk is too great and not engaging,” said Adam M. Smith, a partner at Gibson, Dunn and Crutcher and a former adviser at Treasury’s Office of Foreign Assets Control, which oversees sanctions. “Banks have historically been very risk-averse — as they should be — in the sanctions space and I think over-compliance in that context can be expected.”

Due to the price cap, many countries may stop any action for a while so that they can analyse all the risks, including decisions which could lead to sanctions from Western countries.

“That’s a real risk,” said Hunter Kornfeind, an oil market analyst at Rapidan Energy Group. “There could be a multi-week lull when some buyers are reluctant to move barrels as they wait and see. It’s not going to be like the whole trade shuts down, but there could be some who take a step back.”

Russian Deputy Prime Minister Alexander Novak pointed out that Russia will not export oil to countries that set price caps. According to him, such restrictions mean that by interfering with the market, Moscow will only interact with buyers willing to work under normal market conditions.

For his part, Russian President Vladimir Putin has stated that Moscow will not deliver anything abroad if it is against its interests. He warned that the introduction of oil price caps could have “grave consequences for global energy markets.”

Although the full impact of what the price cap is not yet known, the attempts to further financially and economically isolate Russia are likely to be another spectacular failure.

 

 

MORE ON THE TOPIC:

Support SouthFront

SouthFront

Subscribe
Notify of
guest
18 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Armin

The voice of the American master is increasingly faint……. Things go very badly, and consequently, it has mental confusion and depression. Call them, if you like, frustrations.

hash
hashed
Carlo

tomorrow I will go to the restaurant. I can set the cost of dinner at €1 or this beautiful neoliberal market mechanism is only valid for Angloameriscums elites?

hash
hashed
M.Paraplu

Tomorrow I’ll go to the gas station and set the price cap at 1 euro a liter. That should be reasonable.

Last edited 1 month ago by M.Paraplu
Florian Geyer

It’s a fact that all with a functioning brain can see that the UK Government has gone Full Retard.

Will we now see the UK using proxy ( ISIS types ) pirates to attack and loot ships on the High Sea’s again. Sponsered Piracy has long been a British strategy.

hash
hashed
Armin

I agree. The British are not as smart as they think. By now UK is poor, the armaments very defective. Underdeveloped country stuff. They are counterfeiters and bandits, pirates, in fact.

Ghost of Moscow

Russia Is Looking Like A Fool, Need I Say More!

hash
hashed
The Crunge

But they’re fools with electricity and water unlike the Ukes.

Better to be a fool with electricity then a fool without electricity.

Klausenburgischer

There was a plan after WW2 to make Germany a POOR and AGRARIAN country never capable of waging war or making anything industrial ever. The name of this plan was the MORGENTHAU plan. Germany miraculously rebuilt its industry after WW2 and with Russian gas and oil it can make better products than the US. Since 1990 this is a real threat. Europe might rise. This is why it must be destroyed. Everything must be taken from Europe. Cars banned. Electric cars forced on it. Even in those we make better than the US then even that is destroyed. This is malice – a racially, ideologically and religiously motivated hatred towards all European people. Do not kid yourselves. It is working miraculously well.

Slavs are killing slavs the last two big white Christian nations that could not be flooded with migrants that could not be intermixed. They will keep killing each other. While a whole continent will go poor and destitute.

There is only one winner. The one who planned it all.

Armin

The stupid and crimainal Morgentau plan failed. Germany is still there. David Irving also argues that the Anglo-Saxons failed to destroy Germany, The forces of evil thought they were destroying Europe, but they couldn’t and they won’t. Third world invaders are still minorities. And it’s too late to do it more invaders arrive, as the master – America – and all her vassals are in fall.They are twilight “elites” of inferior idiots.

N.N.

The Morgenthau plan did not “fail”, it was suspended when the details leaked out and caused international outrage, and when other people argued that Germany was needed as a pawn in the Cold War, and thus the Morgenthau plan was replaced with the Marshall plan. But the Cold War was “won”, and now, with blasting the two pipelines, the next phase of the Morgenthau plan has been kicked off again.

And yes, those who “planned it all” are the only beneficiaries, all of the same tribe.

Darius

” There is only one winner. The one who planned it all. ” . All in all , I agree with your comment. But “the one who planned it all” is too much of guessing , I think. There is no specifically “the one”, but it is the western elite , the ideology and the art of thinking to rule the world. Out of this thinking come plans like the PNAC (project for the new American century) or the geopolitical blue-print-books like “The Grandchess” by Zbigniew Brzezinski ( which are not just the spinny thoughts of singular authors , but rather the rare insights into the plans of this “global elite”)

The actual Ukrainian conflict is for me just like the implementation of this book (written allready 1997), – with the clear aim , to weaken the American competitors EU and Russia and finally to conquer the Eurasia (as integrated to the Anglo-Saxon vassals , or more directly militarily conquered).

This is for me also the background of the actual war USA against Germany.

Last edited 1 month ago by Darius
N.N.

You do need to read the “Protocols of the Learned Elders of Zion”, which are imho not at all a fabrication, the contravening court verdict notwithstanding. It’s much more like a history book, that describes the events before instead of after they happened, with astonishing accuracy. In other words, it describes a plan, and history shows that this plan was successfully executed.

The Crunge

The key word is likely.

hash
hashed
Darius

” Although the full impact of what the price cap is not yet known, the attempts to further financially and economically isolate Russia are likely to be another spectacular failure. ”

It really seems so , but let’s wait a little bit and see what comes.

hash
hashed
Yuri

morons like ramsemed Sawyer, gestapo and jens—retired senile janitors desperate for attention—try gay bar in oregun and pay in rubles for sex

hash
failed
Irishgerry

Another disaster on the horizon 😆 🤣 😂

hash
failed
Medved

This attempt at a price cap shows just how weak NATO is. If it were strong then there would be a ban on Russian oil, complete with a blockade.

hash
hashed
John Kesich

“Due to the price cap, many countries may stop any action for a while so that they can analyse all the risks, including decisions which could lead to sanctions from Western countries.”?!

Anyone who thinks countries haven’t already done their analysis should climb back onto their Christmas tree. If they stop action it will be because they think they can use the BS excuse above.

hash
hashed
18
0
Would love your thoughts, please comment.x
()
x