More than half of Russia’s refined fuel exports have been capped at $45 a barrel, highlighting the potential pressure the nation’s oil industry could face from the latest Group of Seven sanctions.
(Bloomberg) — More than half of Russia’s refined fuel exports have been capped at $45 a barrel, highlighting the potential pressure the nation’s oil industry could face from the latest Group of Seven sanctions.
The G-7 set out two sets of price thresholds on Russian fuels — $45 for cheap ones, $100 for pricier ones — that kicked in on Feb. 5. Anyone paying more wouldn’t be allowed to do so on European tankers or with industry standard insurance.
The lower those price caps, the more it pressures Russia and the supply chain that can deliver its fuels.
A line-by-line review of every fuel that was capped shows that about 53% of the nation’s exports by volume can only be shipped on European tankers with western insurance if the buyers pay $45 or less for them. The remaining 47% are subject to a higher threshold of $100 a barrel.
It’s important to note that there are also numerous legal workarounds to the cap and an EU imports ban on Russian supplies to ensure the nation’s cargoes reach buyers and that Europe can still find the imports it requires.
READ: As Europe Bans Russian Diesel, Traders Plot Ways Around It
The G-7, especially the US, implemented the price caps as a means of ensuring that Russian petroleum kept flowing by allowing buyers to keep accessing European tankers, industry standard insurance, and other key services.
To discern which fuels should be subject to which caps, the US and EU both published lists of numeric identifiers and stipulated the levels at which each one is to be capped.
There are a handful of anomalies in the lists because the global system for codifying fuels is not perfect.
For example, the code 2710 12 15 is considered to be finished motor fuel in the US but in Europe it’s light oil “for undergoing chemical transformation by a process other than” refining. Whatever that is, it’s not road-ready gasoline.
As such, Europe lists it as being at a discount while the US marks it as a premium fuel.
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