The ban on russian oil imports and restrictions under the Price Cap Policy (imposing a “price ceiling”) is an important step in strengthening sanctions pressure on the terrorist state. After all, 80% of russian oil is exported using Western maritime transport services. However, serious consequences would only arise in case of more effective restrictions, – believes First Deputy Prime Minister – Minister of Economy of Ukraine Yuliia Svyrydenko.

“The sanctions coalition has once again demonstrated unity and developed a mechanism that contains a significant potential to increase pressure on the aggressor state. This is an absolute plus: after testing in practice, the Price Cap Policy mechanism can be applied not only to oil, but also to gas, which is already being discussed,” said Yuliia Svyrydenko.

Also, according to the Minister of Economy of Ukraine, a financial ceiling for petroleum products will be announced in February. Turkey has already started to demand from vessels transporting russian oil through its waters to provide letters of guarantee from insurance companies. So, the mechanism works.

“russia’s strong negative reaction confirms that we are moving in the right direction,” Yuliia Svyrydenko continued. “However, there is a drawback in the decisions made. This is an acceptable and generally comfortable level of price restrictions for russia, which will minimally affect russia’s oil revenues compared to previous years. And, accordingly, the ability and desire of russia to finance the war in the future. Therefore, Ukraine will work to ensure that the level of price restrictions is revised downwards by our allies as soon as possible. The optimum level that would really hit russia’s oil revenues hard is USD 30-35 per barrel.”

As a reminder, on December 5, the ban on imports of russian oil was introduced by the UK and the EU (earlier such imports were banned by the USA, Australia, Canada). At the same time, the EU’s decision to ban imports does not apply to crude oil imported by pipelines from russia to countries that do not have viable alternative supply routes in the short term. It also contains a number of exceptions: in particular, for Bulgaria and Croatia.

Simultaneously with the introduction of the EU and the UK ban on oil imports on December 5, 2022, a coalition of countries (G7, Australia, the EU) introduced a Price Cap Policy for the maritime transportation of crude oil and petroleum products.

According to the decision of the European Union, imports of petroleum products from russia will also be banned starting February 5.

For reference

The decision on the Price Cap Policy allows the provision of certain services related to the maritime transportation of russian oil only in case it is purchased at or below a certain price (“price cap” or “price ceiling”). In particular, this applies to:

• Trade and trade intermediation;
• Financing;
• Delivery;
• Insurance, including reinsurance, of protection and indemnity;
• Services for the provision of flag (registration) of vessels;
• Customs intermediation, etc.

The agreed price for today is USD 60 per barrel, but it can be revised by the Coalition.