The US has said that Russia could still evade the planned price cap on its oil because it may likely have access to enough own tankers and transport and insurance services to ship its oil.
The US is leading a G7 Group coalition smarting for a price cap against Russia’s gas before year end due to the latter’s ongoing military aggression in Ukraine.
An unnamed U.S. Treasury official told Reuters on Monday that there have been estimates that Russia could continue to ship 80-90% of its oil outside the price cap regime, and those estimates “are not unreasonable,” the unnamed U.S. official was quoted
Therefore, only up to 2 million bpd of Russian crude and refined petroleum exports may have to be shut in from early December, when the price cap mechanism is planned to kick in, according to the official.
The International Energy Agency [IEA] revealed that Russia exported 7.5 million bpd of crude and refined products in September.
“In theory there is a big enough shadow fleet to continue Russian crude flows after Dec. 5,” Andrea Olivi, Global Head Wet Freight/Oil Chartering at trading giant Trafigura told Reuters on Friday.
Last month, the G7 group of the most industrialized nations agreed to finalize and implement a price cap on Russian oil, aiming to reduce Vladimir Putin’s oil revenues for his war chest.
The G7 Group hopes to ban maritime transportation services for Russian oil unless the products are purchased at or below a certain price cap.
European Union ambassadors also endorsed the price cap after reaching an agreement earlier this month to impose a new package of sanctions on Russia, including banning maritime transportation for Russian oil to third-party countries unless the oil is sold below or at a certain price cap.
Also Read: G7 Agrees On Oil Price Cap Against Russia
But there are fears that the price cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing because top importers China and India haven’t signed onto the price cap, and because Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.