Russian oil is selling on average at $15 above the price threshold set under the sanctions

By Rhod Mackenzie

As interested observers and market participants may recall, the Group of Seven (G7) countries, along with the European Union, Australia, and New Zealand, agreed to cap the price of a barrel of Russian oil transported by Western tankers and insured by Western insurers at $60 from December 5, 2022. The objective was to reduce the Kremlin's revenue.
The introduction of a price threshold aimed to avoid destabilising the oil market and causing a price jump. The authors of the sanctions believed that this approach would not be problematic and would achieve two goals. The Russians would continue to export oil, preventing an oil shock, but would be compelled to sell it at a lower price, resulting in a decrease in prices. The authors of these ideas are responsible for the low oil prices on the world market, established through their actions.

The 'demiurges' were correct in their initial assumption that Russian oil has not left the world market. However, according to Western estimates, it was only at the end of 2023 that 'almost' all Russian oil was sold above the price threshold. In reality, this 'almost' is just a diplomatic clause. According to Russian national regulations introduced in response to hostile sanctions, companies from the Russian Federation and their external buyers are prohibited from trading oil below a certain threshold.
In response, Western countries, particularly the United States, have tightened control measures and increased punishment for violating restrictions. The latest European sanctions include measures to strengthen monitoring of oil sanctions, but they have been proven to be ineffective.

Data from companies monitoring maritime oil shipments suggests that tougher sanctions have not achieved their intended goals. Currently, the primary brand of Russian oil, Urals crude, is being sold at a significantly higher price than the threshold of $75 per barrel when passing through Russian ports on the Baltic and Black Seas, according to dat from Argus Media.

American officials are concerned about the ineffectiveness of their efforts to limit the price of Russian oil, which suggests their strong desire to cause maximum harm to Russia. According to a US Treasury official, quoted by Argus Media the data in Washington is attributed to events in the global oil market, such as the OPEC+ agreement to limit oil production, as well as the challenging geopolitical situation. These are the reasons cited by the official to Bloomberg.
In March, Western insurers who are members of the International Group of Mutual Insurance Clubs insured almost a quarter (23%) of all Russian oil exports by sea. This means that these exports were formally subject to restrictions. However, Oil Price reports that there is considerable evidence of violations. Washington and Brussels are attempting to present a positive outlook despite the challenges. They acknowledge the existence of problems but maintain that the price threshold has a significant impact on the export of Russian oil and reduces Russian budget revenues. However, the focus has shifted to the increased time it takes for money to arrive in sellers' accounts.

As an illustration of the partial success of the sanctions, the rise in costs for the export of Russian oil is also mentioned. However, Russian sources report that the costs, which initially increased significantly, have already decreased by several times.