The G7 and its allies have halted their regular reviews of the Russian oil price cap scheme, despite Russian crude prices trading above the set limit due to a global crude price surge. Russian oil producers have devised strategies to sell their oil with reduced reliance on Western shipping and insurance services, making it challenging for Western countries to enforce the existing price cap.
The G7, along with the European Union and Australia, introduced the price cap mechanism on Russian oil in December and extended it to fuel in February. Initially, EU nations agreed to review the price cap every two months, and the G7 would review it “as appropriate,” including assessing its implementation and adherence.
However, the G7 has not conducted a review since March, and insiders familiar with G7 policies indicate no immediate plans for adjustments to the scheme. While some EU countries were interested in a review, there appeared to be limited appetite from the United States and G7 members for changes.
The price cap mechanism allows third countries to purchase Russian fuel using Western ship insurance, provided they can prove that the purchase complies with price limits set at $60 per barrel for crude, $45 per barrel for heavy fuel, and $100 per barrel for light fuel like gasoline and diesel.
The mechanism aimed to reduce Moscow’s revenues amid its conflict with Ukraine while preventing market disruptions due to an EU ban on Russian oil. Although the average price of Russia’s flagship crude grade, Urals, exceeded the $60 per barrel cap in August, Russia has adapted by shifting most exports to domestic or non-Western foreign shippers that don’t require Western insurance coverage.
At least 40 intermediaries, including companies with no prior involvement in the sector, handled over half of Russia’s crude and refined product exports between March and June, demonstrating the shift away from Western shipping.
While Western ships are less involved in transporting Russian crude, they still play a role in moving products due to increased challenges in monitoring product shipments. A U.S. Treasury official has stated that the cap remains effective in reducing Russian revenues, and while the group remains flexible, there are currently no immediate plans for revisions to the scheme.