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Russia’s oil production cap will instantly hurt Putin because of the Ukraine war, according to the US

According to the US, a price limitation on Russian oil will limit Russia’s ability to fund its “illegal war in Ukraine.”

The cap, which was accepted by Western allies on Friday, aims to prevent nations from paying more than $60 (£48) for a barrel of Russian crude oil that is transported by sea.

The law, which is set to take effect on Monday, will increase Western pressure on Russia over the invasion.

Ukraine argued that the Western cap should be cut in half. Russia declared that it would stop supplying to nations that enforce it.

The G7 industrialized nations—the US, Canada, the UK, France, Germany, Italy, Japan, and the EU—proposed the price ceiling in September in an effort to limit Moscow’s ability to fund the conflict in Ukraine.

The G7, the EU, and Australia said in a joint statement that the choice was made to “prevent Russia from benefitting from its campaign of aggression against Ukraine.”

The price cap, according to US Treasury Secretary Janet Yellen, would also further restrain Russian President Vladimir Putin’s financial situation and “limit the revenues he’s using to fund his brutal invasion” while preventing disruptions in global supplies that could drive up gasoline prices globally.

The price cap “would immediately cut into Putin’s most important source of income with Russia’s economy already declining and its budget more stretched thin,” she said in a statement.

  • Allies and the G7 agree to a ceiling on the price of Russian oil.
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UK Chancellor Jeremy Hunt declared that his country would not change its position and will keep seeking out new approaches to “tight down on Putin’s financing lines.”

The price cap deal was reached just a few days before the EU-wide embargo on the import of Russian crude oil by sea, which takes effect on December 5th.

The price cap is designed to work in conjunction with that and influence oil exports globally.

According to the US, a price limitation on Russian oil will limit Russia's ability to fund its "illegal war in Ukraine."
According to the US, a price limitation on Russian oil will limit Russia’s ability to fund its “illegal war in Ukraine.”

Countries which sign up to the G7-led policy will only be permitted to purchase oil and petroleum products transported via sea that are sold at or below the price cap.

Ukraine’s Western allies also plan to deny insurance to tankers delivering Russian oil to countries that do not stick to the price cap. This will make it hard for Russia to sell oil above that price.

Senior Russian politician Leonid Slutsky told Tass news agency the EU was jeopardising its own energy security with the cap.

Though the measures will most certainly be felt by Russia, the blow will be partially softened by its move to sell its oil to other markets such as India and China – which are currently the largest single buyers of Russian crude oil.

Before the war, in 2021, more than half of Russia’s oil exports went to Europe, according to the International Energy Association. Germany was the largest importer, followed by the Netherlands and Poland.

But since the war, EU countries have been desperately trying to decrease their dependency. The US has already banned Russian crude oil, while the UK plans to phase it out by the end of the year.

source: summarybio.com