Brussels (Brussels Morning Newspaper) – Six EU nations called on the EU Commission to reduce the $60 per barrel price cap placed on Russian oil by G7 nations, saying that would lessen Kremlin’s revenues while averting a market shock.
As reported by Reuters, Sweden, Latvia, Denmark, Lithuania, Finland and Estonia stated in a letter,
“Measures that target earnings from the export of oil are critical since they decrease Russia’s single most significant income origin.”
“We believe now is the time to further expand the effect of our sanctions by reducing the G7 oil price cap,”
It stated.
The letter of the six countries further said,
“The global oil market is better supplied today than in 2022, lowering the risk a lower price cap will induce a supply shock.”
“In the idea of little storage capacity and its excessive dependence on energy exports for income, Russia has no alternative to persist oil exports even at a substantially more down price,”
the letter stated.
In the past, the G7 countries have agreed to a price cap on Russian oil in order to limit the revenue of Moscow from oil exports since this is a crucial source of financing its invasion of Ukraine. The price cap scheme was introduced for crude oil at $60 per barrel and $100 per barrel for refined petroleum products on December 5, 2022. This enables Western operators to insure and transport Russian oil only if it meets the established threshold.
How does Russia depend on oil exports for income?
According to experts, Moscow has been using oil revenues as the most important finance source to wage its war on Ukraine from the start of the invasion that began in February 2022. Oil remains one of Russia’s largest parts of its budget, making about 25 per cent of its annual income in 2023. The two other large state companies, Gazprom Neft and Surgutneftegas produce more than 1 million barrels of oil per day; billions of revenues are directly flowing into the hands of the Kremlin to fund military operations.
Despite international sanctions looking to curtail these revenues, Russia has maneuvered to reorient its flow of oil into Asian markets-majorly India and China, whereby it sells them crude oil cheaply. Since this strategy avails Russia of continuous income flow despite sanctions, it is said to continue earning humongous proceeds.
