Russia oil revenue soars, defying price cap and wartime restrictions
Breanne Deppisch
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The G-7 price cap on Russian oil has not stopped Moscow from shipping its crude at near-record volumes and at prices well above the cap set by Western leaders in December, according to a new assessment.
The report underscores the limitations of the price cap, which aims to cut off Russia’s main source of war funding while also keeping its oil on the market.
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Around half of Russian crude is now estimated to be sold via its growing “shadow fleet” of off-book tankers, allowing Moscow to operate outside the reach of Western sanctions and sell its crude at a much higher price point than the cap allows, according to a report from the Institute of International Finance, Columbia University, and the University of California.
In the past week, Russia exported an average of 3.38 million barrels per day, according to data from Bloomberg, an amount that has been surpassed just four times since the beginning of 2022. Export volumes increased in the four-week period following the price cap’s implementation on Dec. 5, averaging around 3.27 million barrels per day.
These volumes are being sent primarily to Asia, India, and Turkey, the report said.
The total amount shipped to those countries, as well as those that did not show a final destination, rose to 3.27 million bpd last month, the highest observed amount since the start of 2022.
And data suggest the new customers are willing to pay a premium for the crude: Exports from Russia’s Pacific terminal averaged around $74 per barrel in the four weeks that followed the cap’s implantation.
Some supplies, including crude shipped from Russia’s Pacific port to China, average an even higher price of $82 a barrel.
That’s well above the $60 threshold set by the G-7 and above Russia’s flagship Urals grade crude, which in January fell to trade as low as $38 per barrel.
Russia also uses its growing “ghost fleet,” or network of unregistered ships, to ship its seaborne crude. Though the exact size of Russia’s ghost fleet is not known, recent estimates from trading giant Trafigura put it in the range of 600 tankers, including 400 dedicated crude vessels — a staggering fleet that would account for 20% of the world’s total.
Ship-to-ship transfers of Russian-origin products have also soared, and some 30 cargo transfers have been observed in the Mediterranean alone since the start of the year.
Still, estimating how much oil each country is getting from Russia is nearly impossible to determine, since many ships are listed without a final destination to evade sanctions.
Instead, the report urges much more stringent enforcement of sanctions on Russian oil exports, including ensuring compliance with price cap-related restrictions on shipping, maritime insurance, and other services.
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“Our surprising finding of a significant share of Russian crude oil being sold well above the price cap level of $60 a barrel urgently calls for further investigation of these transactions and reinforces the need for stepped-up enforcement,” the authors said.
“Key elements of this would be risk-based audits of attestations regarding price cap compliance, increased transparency of transactions with non-G-7 shipping service providers, and strengthening of capacities for sanctions enforcement, especially in the EU.”