Oil Price Cap Could Strike Russia’s War Chest — If Enforced

• Leaders of the world’s biggest developed economies are weighing a cap on the price of Russian oil meant to strike at the main pillar of the Kremlin’s finances following its invasion of Ukraine — and to limit the havoc that high energy prices are wreaking worldwide. 
• Details haven’t been agreed at the Group of Seven summit in Elmau, Germany, but the basic idea would be to tie the price cap to the services that make trading oil possible. For instance, insurers would be barred from dealing with shipments that are above the cap, wherever it winds up being set. 
• Because such service providers are largely based in the European Union and United Kingdom, Russia would be expected to face difficulty finding large-scale workarounds. Limiting the price would reduce the Kremlin’s income from oil — at the start of the war, it was about $450Mn per day from Europe alone. The cap also would limit the impact of higher oil prices on inflation in consuming countries, with the cost of gasoline and diesel squeezing consumers and businesses. 
• Russia has been able to find buyers outside the West as Asian customers — like India and China — have replaced the EU as the biggest buyers of oil shipped by sea. Due to sanctions, Russian oil is trading at a steep discount to international benchmark Brent, fattening the profit margins of refiners in India who turn crude into gasoline. And some Russian oil sales have simply gone off the books.

(Source: AP News)