How to make sanctions on Russian oil exports more effective? This is what the finance ministers of the G7 countries will discuss during a meeting in Washington on Friday, where the Biden administration will propose a mechanism to cap the price of Russian oil sold on the international market.
Concretely, Russia would sell its oil to the G7 countries at a lower price than the one at which it sells it today, but which would remain higher than the production price, so that it has an economic interest in continuing to sell it to them, and so that it does not cut its deliveries.
” There is a significant margin between the price of production and what Russia is doing today, within which we can set the ceiling that will create economic incentives for Russia to continue producing oil, while denying them the revenue surplus that they get today”, said a G7 official at the end of July.
So far, the embargoes imposed by Western countries on exports of Russian black gold in retaliation for the invasion of Ukraine decided by Moscow on February 24 have not had the desired effect. less than we can say.
Moscow earned $97 billion from oil and gas sales through July this year, about $74 billion of that from oil, according to the International Institute of Finance. “Russian oil continues to flow freely”, underlined Wednesday in a tweet, its deputy chief economist of the Institute, Elena Ribakova. She estimates that Russia’s trade surplus could reach $300 billion in 2022, largely in part thanks to hydrocarbon sales that have largely benefited from high oil prices since last March.
Third consecutive month of decline
Oil prices, which rose above $130 a barrel in the first weeks of the war, have stabilized around $100 in recent weeks. Although it is still higher than a year ago, the price per barrel fell in August, for the third month in a row. That of Brent evolved this Thursday around 95 dollars, that of WTI, the American reference, around 88 dollars. Declines which are mainly explained by a higher probability that Western economies will experience a recession due to a much more restrictive monetary policy by central banks which give priority to the fight against high inflation.
Indeed, the hydrocarbon sanctions have also fueled a rise in energy prices that have caused gasoline prices to rise to historic levels in the United States and gas prices to soar in Europe. which continues to weaken the economies of the European Union.
Especially since even in volume, Russia was finally little sanctioned. It exported 7.4 million barrels of crude and products such as diesel and gasoline every day in July, according to the International Energy Agency (IEA), down about 600,000 barrels a day since then. the beginning of the year. Moscow was able to compensate for the drop in sales to Europe, the United States and the United Kingdom by buying from China, of which it has become the main supplier, supplanting Saudi Arabia, and India, which is buying from it today. today nearly 1 million barrels per day, whereas the Asian giant was only a very marginal customer at the start of the year.
The stakes of the meeting of G7 finance ministers therefore remain limited, with this price cap mechanism. “This is, in our opinion, the best way to weigh on Putin’s resources. By doing so, not only will Putin’s revenue from Russian oil sales fall, but also global energy prices.”summarized Karine Jean-Pierre, the spokeswoman for the White House, during a press briefing on Wednesday.
It is this subtle winning balance for the G7 countries that must be found. And according to US Treasury Secretary Janet Yellen, the search is progressing well. On Wednesday, she said to herself ” really optimistic about the substantial progress that has been made by our teams and the whole of the G7 towards us achieving a price cap”during a meeting in Washington with his British counterpart, Chancellor of the Exchequer Nadhim Zahawi.