GUSH - Enforcement concerns remain over G7 price cap on Russian oil

2023-07-27 07:03:23 ET

The U.S. government will likely reach out to Western allies to remind them to adhere to the price cap on Russian crude oil exports by ship, Reuters reported citing sources, as prices have risen above the limit.

The G7 countries, Australia and the European Union had imposed a $60-per-barrel cap on Russia's sea-borne crude exports in retaliation to its war on Ukraine.

The Biden administration plans to remind western trading firms, tanker owners and insurers to abide by the price cap. "The initial inclination is to be soft, and to enforce quietly with letters, phone calls," a source told Reuters.

The cap essentially bans Western companies from providing services including transportation, insurance and financing for Russian crude sold above $60.

Russian Urals crude has been trading at or above $60 for more than two weeks. Urals oil futures ( URDB:COM ) price is currently up 1.5% .

Compounding worries in the West, Moscow is increasingly relying on smaller trading firms to export crude to Asia, where China and India have become top buyers of Russian crude.

Around 40 middlemen, including firms with no prior involvement in the business, handled Russian oil trading during March-June, according to a Reuters tally . While these trades do not violate sanctions, they could hinder western enforcement agencies tracking Russian oil transactions.

Another cause for concern is Russia's exit from the Black Sea grain deal and growing attacks on Ukrainian ports, which stoked food inflation fears as wheat prices soar.

In response, Nato will increase surveillance in the Black Sea region, including with maritime patrol aircraft. "Allies are stepping up support to Ukraine and increasing vigilance," said secretary-general Jens Stoltenberg. "We remain ready to defend every inch of Allied territory from any aggression."

More on Russian crude

• Russia poised to surpass Saudi Arabia as China's top oil supplier
• Russian crude tops $60 cap for first time in test of Western sanctions
• Western Sanctions On Russia Are Finally Having An Impact
• USO: Geopolitical Risk Likely To Weigh On Crude Prices

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