High Oil Prices Weaken Russia Sanctions... "Russia Earns Additional 20 Trillion Won from Oil Sales"

"About 70% of Russian Crude Oil Sold Above $60"
G7-Led Russian Crude Oil Price Cap Evasion

Following the recent surge in international oil prices, the effectiveness of the West's oil price cap on Russia is being nullified. Analysts estimate that Russia's additional revenue from oil sales, taking advantage of the recent price increase, could reach $15 billion (approximately 20 trillion KRW) this year alone.

[Image source=Yonhap News]

According to major foreign media on the 24th (local time), Russia transported three-quarters of its seaborne crude oil last month without using Western insurance services. This means that over 70% of Russian crude oil traded was sold at prices above $60 per barrel. The West has implemented an oil price cap, limiting the sale price of Russian crude oil to below $60 per barrel and refusing to provide insurance and other financial services for oil sold above this price. The volume of oil sold above $60 per barrel has increased by about 50% compared to this spring.

Foreign media explained, "This indicates that Russia has become more adept at circumventing the price cap," adding, "It means Russia can sell oil at prices closer to international market rates."

The Kyiv School of Economics (KSE) in Ukraine estimated that Russia's oil sales revenue this year will increase by at least $15 billion more than initially expected. This is due to the continuous rise in international oil prices since July and the fact that Russia no longer sells its crude oil at prices significantly lower than market rates.

With major oil producers Russia and Saudi Arabia deciding to cut production, recent international oil prices surged to the $90 per barrel range amid supply shortage concerns. Brent crude, the international oil price benchmark, surpassed $95 per barrel intraday on the 19th and is currently trading around $92 per barrel, nearly a 30% increase since June. Russia is also offering its crude oil at higher prices in the market. The average selling price of Russian Urals crude in July exceeded the $60 per barrel cap set by the West. Additionally, Russia appears to be weaponizing energy by controlling exports of diesel and gasoline.

As a result, there is analysis that the original intent of the West's oil price cap is fading. The West aimed to limit Russia's oil sales revenue to damage its finances and squeeze its war funding by imposing the cap after Russia invaded Ukraine, but the sharp rise in international oil prices is diminishing the sanctions' effectiveness.

Ben Hilkenstock, an economist at KSE, stated, "Considering the changes in Russia's oil transportation methods, it may become very difficult to effectively enforce a meaningful oil price cap going forward," adding, "It is regrettable that we did not make more efforts to exert greater influence."