Flaws in Russia's Oil Price Cap Exposed
Enforcement challenges undermine Western sanctions amid Ukraine conflict
Scott Wright (SW)May 8, 2025
The oil price cap, introduced by Western nations against Russia, is showing flaws in its implementation. Despite international efforts to limit the sale price of Russian oil to $60 per barrel, Russia has sold the commodity at higher prices. This undermines the intent of Western nations to limit Russia's oil sale revenues, especially in light of the ongoing conflict in Ukraine.
The G7 nations, the European Union, and Australia had agreed that no more than the set price should be paid for Russian oil. To enforce this internationally, the market power of industrialized nations in the shipping and insurance sectors was to be leveraged. Shipping companies and insurers were thus not supposed to transport Russian oil purchased at higher prices.
However, studies from the KSE Institute of the Kyiv School of Economics indicate that Russian oil was sold in the country's main export ports at prices significantly above the set limit, recently even for more than $70 per barrel. Benjamin Hilgenstock from the KSE Institute emphasized that the regulation can only work if governments credibly demonstrate to the involved companies that they will enforce it.
Another issue in implementing the oil price cap is the lack of oversight. Shipping companies and insurers only need to provide a brief confirmation from their clients. How these confirmations are checked, and whether they are checked at all, remains unclear. The EU Commission pointed out that various national authorities are responsible for oversight. However, no violations have been reported so far.
The situation demonstrates that international sanctions and regulations are only effective if they are consistently enforced and monitored. It remains to be seen how Western nations will respond to these developments and whether they will take measures to improve the implementation of the oil price cap and ensure its enforcement.
