U.S. and G7 “price caps” are supposed to go into effect today on refined products of Russian oil, particularly diesel fuel and heating fuels. In line with the financial oligarchy’s “above reality” view of its own sanctions on Russia, Janet Yellen made a statement on Feb. 5 which chose to ignore the findings of the IMF and the Institute for International Finance, regarding growth having been restored in the Russian economy despite the “monster sanctions.” Yellen said, “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.”
Diesel, kerosene and gasoline will be “capped” at $100/barrel; fuel oil, at $45/barrel, by the G7. The European Union has a summit of finance ministers scheduled this week, and is supposed to issue yet another round of sanctions, also focused, at least in part, on refined petroleum products.
Several oil analysts are quoted in an OilPrice.com story today to the effect that the crude oil price cap, like the other fossil fuel sanctions, have been completely circumvented by Russia and its trading partners in other countries. There has, however, been a drop in the Russian government’s oil-related tax revenues in December, according to several reports, by about 45% relative to December 2021. But the government is moving to change the basis on which export fees are calculated, from one based on the price of Urals crude—recovered in eastern Russia and largely sold to the West—to one based on the much higher price of Brent crude, as a way to recover that revenue. The Siberian crude oil which Russia sells, through new pipelines and by ship, to the East, has held up in price similar to that of Brent crude, despite sanctions and price caps.
A new report in The Economist says volumes have also recovered. “Russia’s exports took a knock after Europe’s initial salvo in December,” it says. “Two months on, however, they have recovered to levels last seen in June. The volume of oil on water, which tends to climb when the market jams up, is back to normal. As expected, China and India are picking up most of the embargoed barrels. Yet there is a surprise: the volume of cargo with unknown destinations has jumped. Russian oil, once easy to track, is now being distributed through more shadowy channels.”
As to how this is done, The Economist report says: “We find, to the West’s chagrin and Russia’s relief, that the new ‘shadow’ shipping and financing infrastructure is robust and extensive. Rather than fade away, the grey market stands ready to expand when the next set of sanctions is enforced.” (https://www.economist.com/finance-and-economics/2023/01/29/how-russia-dodges-oil-sanctions-on-an-industrial-scale)
