The Biden Administration has said that the sanctions against Russia are biting in, and “sharply” reducing the economic power of President Vladimir Putin to prosecute the war in Ukraine.
Speaking yesterday at the G20 meeting in India, the U.S. treasury secretary, Janet Yellen, said the U.S. and the world are witnessing “emerging markets negotiate deep discounts on Russian oil which keeps oil in the global market but sharply reduces the Kremlin’s take.
“The way I see it, our sanctions have had significant negative effect on Russia so far. While by some measures, the Russian economy has held up … Russia is now running a significant budget deficit,” Yellen said.
The price cap on Russian crude oil, which went into effect on December 5, was designed to reduce Russia’s oil revenues while allowing crude oil to keep flowing to prevent a spike in prices.
About three weeks ago, another price cap came into effect—on Russia’s crude oil products such as diesel.
But some critics have argued that the claims on the effects of the price cap may not really be correct. Some say what has happened is that Russia’s crude oil has come changing destinations from Europe to India and China – two countries not abiding by the price caps.
The crude oil price cap was set at $60 per barrel, although the Russian Urals grade traded at less than $50 in January, so Russia’s crude was already selling well below the price cap.
Last December, President Vladimir Putin banned the supply of Russian crude oil and crude oil products to any company abiding by the price cap as of February 1, 2023.
Yellen has been a staunch support of the oil price cap mechanism. “The caps we have just set will now serve a critical role in our global coalition’s work to degrade Russia’s ability to prosecute its illegal war. Combined with our historic sanctions, we are forcing Putin to choose between funding his brutal war or propping up his struggling economy.
“And, we are disrupting Russia’s military supply chains, making it harder for the Kremlin to equip its troops and continue this unprovoked invasion,” the US senior official was quoted saying earlier this month in a statement.
By Bosco Agba