US’s Russian oil price ceiling failed so it continues to double down

By Rhod Mackenzie

The implementation of a price ceiling on Russian oil has been seriously unsuccessful, a fact that has already been acknowledged in Europe.  Nevertheless, Washington still refuses to accept this outcome and now, nearly a year later, has levied sanctions on two shipping companies. Additionally, they have declared their intention to ensure adherence to the G7’s ( US and its vassals) imposed regulations by all available means. Observers however highlight the total impracticality of such endeavours: it is impossibe to out play the market and impose your external regulations on the way it functions.

Who Controls the Oil Price?
The proposal of implementing a price ceiling aimed at decreasing Russia’s earnings from exporting petroleum and its related products, while simultaneously safeguarding Russian supplies to global markets on its face seemed like good idea as the US is used to bullying countries,imposing sanctions and making others go along with them.The Western powers targeted the components of transportation and insurance, which are the major domains of international companies. This was intended to serve as a “stop valve” for Russia whereby anyone transporting and delivering its oil had to make sure the selling price was no more than $60 per barrel when loaded onto a tanker.

However, this plan was unsuccessful. Russia managed to remove more than 70% of its maritime exports from the G7 embargo and even started selling Urals grade crude above the price ceiling almost immediately after it was introduced. Transport and insurance of Russia goods are now conducted without the participation of Western firms. A distinct fleet of tankers has been created to transport the sanctioned oil.
For Europe, the impact was catastrophic: there was price chaos in the energy sector, a severe lack of hydrocarbons, and the added burden of having to overpay intermediaries – namely India and China, who sell Russian resources on the world oil and petroleum products market.

Europe had to acknowledge that adhering to price restrictions on Russian oil and petroleum products was nearly impossible: the market dictates prices. Moscow’s export revenue continues to increase while the European Union procures oil at excessively high prices through intermediaries.

Washington has eventually decided to intervene and has imposed sanctions on two companies that had transported Russian oil above the “ceiling” price. Lumber Marine SA from the UAE and Ice Pearl Navigation Corp. (Türkiye) were the two companies affected, with two of their tankers being declared “blocked property”. The decision caught observers off guard, as the application of restrictions at this late stage suggests that achieving any meaningful change is unlikely.
However, according to Eric Van Nostrand, the US Treasury Assistant Secretary for Economic Policy, this is not the end. The United States will reinforce sanctions against those who evade restrictions and will aim to raise costs when shipping Russian oil via sea. In relation to the second objective, he made it clear that Washington will persist in exerting pressure on Russia’s unauthorized fleet of tankers and prevent its further expansion.

Analysts predict that as a seller, Russia will most likely face negative consequences that cannot be avoided.

The shadow fleet is commonly used for reselling our oil, but we have our own fleet for direct deliveries. This could result in a reduction of Russia’s export volumes and a decline in competitiveness in the global oil market. If transport costs become too high, Russian oil and gas companies may need to seek alternative delivery methods, which can be both challenging and expensive, advises Associate Professor Vladimir Nikolaev from the Faculty of Customs Administration and Security at RANEPA St. Petersburg.
To continue to read this article ‘Free of Charge’ please click on the link below

US’s Russian oil price ceiling failed so its continues to double down

By Rhod Mackenzie The implementation a price ceiling on Russian oil has been seriously unsuccessful, a fact that has already been acknowledged in Europe….