A price cap on Russian oil aims to starve Putin of cash. But it's largely been untested. Until now
Prices for Russian oil have risen well above a price cap imposed by Western allies as part of sanctions over the invasion of Ukraine
FRANKFURT, Germany — For months after Ukraine's Western allies limited sales of Russian oil to $60 per barrel, the price cap was still largely symbolic. Most of Moscow's crude — its main moneymaker — cost less than that.
But the cap was there in case oil prices rose — and would keep the Kremlin from pocketing extra profits to fund its war in Ukraine. That time has now come, putting the price cap to its most serious test so far and underlining its weaknesses.
Russia's benchmark oil — often exported with Western ships required to obey sanctions — has traded above the price cap since mid-July, pumping hundreds of millions of dollars a day into the Kremlin's war chest.
With Russia's profits rising, the Israel-Hamas war pushing up global oil prices and evidence that some traders and shippers are evading the cap, the first signs of enforcement are appearing 10 months after the price limit was imposed in December.
But sanctions advocates say the crackdown needs to go further to really hurt Russia.
Reducing oil profits “is the one thing that hits Russian macroeconomic stability the most," said Benjamin Hilgenstock, senior economist at the Kyiv School of Economics, which advises the Ukrainian government.
Oil income is the linchpin of Russia’s economy, allowing President Vladimir Putin to pour money into the military while avoiding worsening inflation for everyday people and a currency collapse.
Moscow's ability to sell more to the world than it buys means it's weathering sanctions far better than expected. Its economy will grow this year while Germany's shrinks, the International Monetary Fund
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