Britain proposes to tighten control over Russian oil price caps

The United Kingdom is discussing the effectiveness of limiting Russian oil prices with its G7 partners in light of changes in world oil prices.

This was stated by UK Finance Minister Joanna Penn, Reuters reports.

Penn, who is in Washington for meetings with U.S. officials and lawmakers, told Reuters in an interview that the price cap has been successful in keeping oil on the market while cutting Russia's revenue and increasing Moscow's oil export costs.

However, she noted fluctuations in global oil prices and changes in Russia's response since the restriction was introduced in December.

"We've got to keep its efficacy under review. We've got to think about how we can ensure that we consider how the response will evolve, and therefore how the price cap and policy should evolve in response to that," Penn said.

Russia was forced to reduce oil exports immediately after the price cap was introduced as it struggled to find enough ships to transport all of its products.

However, the country has managed to move most of its exports through its own or non-Western foreign shippers who do not require Western insurance coverage.

Market data show that since mid-July, most of Russia's Urals crude export grade has been trading above the Western price cap of $60 per barrel amid production cuts by OPEC+ producers, including Saudi Arabia and Russia.

Penn said that the UK continues to adhere to the $60 price cap, but discusses "the whole policy" with its partners, including the United States, and keeps it under "constant review".

Asked whether the UK is seeking a formal review of the policy, Penn replied: "A formal review of the level of the cap is one aspect of that".

Initially, the G7 agreed to review the price cap "as appropriate". But no review has been carried out since March, and there are no plans to review the scheme in the near future.

As a reminder, according to the Financial Times, the steady rise in crude oil prices since July to more than $95 per barrel, combined with a reduction in the discount on Russian oil, will likely result in the Kremlin's oil revenues in 2023 being at least $15 billion more than they could be.

Author – Anastasiya Glotova, 29/09/2023