On December 26, Russian authorities publicly acknowledged – for the first time – that Western sanctions and the price cap have created problems for the country's oil exports. Deputy PM and former Energy Minister Alexander Novak said that Russia was experiencing issues with the insurance of vessels used to export oil.
In addition to the direct prohibition of the import of Russian oil supplies, a coalition of G7 countries, the EU and Australia have agreed on a price cap of $60 per barrel for Russian crude oil, petroleum oils, and oils obtained from bituminous minerals. The sale of Russian oil above the cap will deprive western firms of the opportunity to render services accompanying the export of the commodity, such as the insurance of ships, financing deals, ship chartering, consulting, and multiple others.
The goal of the price cap is to maintain the supply of oil to global markets whilst reducing Russia’s revenues.
In mid-December, reports revealed that the average price of Urals, the main grade of Russian oil, fell below the cap established by the Western coalition. From November 15 to December 14, 2022, the average price of Urals oil was $57.49 per barrel, or $419.7 per ton. The cap on Russian oil prices came into effect on December 5, 2022. This means the Western coalition has already achieved its expected result: Russian oil is being sold $2.51 cheaper than the established threshold.