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Price Cap of Russian Oil and Gas Companies Sold Far Beyound G-7 Group

COMMODITIES(B-Trams):A group of academics stated that in the weeks that followed the imposition of a price cap on the nation’s exports, Russian companies made significantly more money selling the country’s oil than was previously thought.

The hypothesis that Moscow’s revenue from the war in Ukraine is being stifled by price limits is undermined by the research.

In the four weeks following the cap, experts from Columbia University, the Institute of International Finance, and the University of California calculated that Russia’s crude sold for an average of $74 per barrel. That is about a quarter higher than the threshold that the Group of Seven established on Dec. 5, which was $60 per barrel.

Their work was based on an analysis of customs invoice-level data for the four weeks following the cap on crude oil prices sales from all ports and pipelines to buyers all over the world.

Even though Russia itself does not provide access to such data, governments that have argued that measures to prevent the Kremlin from obtaining petrodollars have been successful will be alarmed by their estimates. According to specialists in commodity pricing, the nation’s flagship crude fell significantly below $60 at the point of export in the Baltic and Black seas.

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According to the authors, “Our surprising finding that a significant share of Russian crude oil is sold well above the price cap level of $60 a barrel urgently calls for further investigation of these transactions and reinforces the need for stepped-up enforcement.”

To ensure that buyers adhere to the restrictions on shipping and insurance services, the authors—Tania Babina, Benjamin Hilgenstock, Oleg Itskhoki, Maxim Mironov, and Elina Ribakova—recommended strict sanctions enforcement.

The study found that oil exports from Pacific Ocean ports to important markets like China cost even more, on average $82 per barrel.

The state-controlled Sovcomflot PJSC or a “shadow fleet” of tankers that transport approximately half of Russian shipments are exempt from price caps. According to the report, the remainder will be subject to the threshold because they will rely on western shipping services.

The authors acknowledged that the customs figures had some limitations. They noted that the timing of payments and deliveries may have differed from the invoice date, despite the unprecedented level of detail provided by individual invoices regarding Russia’s oil trade. Nonetheless, they stated that they were certain of the validity of the overall conclusions.

In addition to reducing the flow of petrodollars, keeping Russian crude on the global market was another objective of the prices cap. The Treasury of the United States and others advocated for the upper limit.

The United States has argued that even if Russian crude trades above the cap, it still gives buyers bargaining power and prevents a significant export shutdown that would drive up price. The majority of Russian grades were significantly below international benchmarks like Brent, so the data still support that argument.

Companies and traders can only use many western services, like industry-standard insurance, under the terms of the cap if they buy Russian crude at $60 per barrel or less. Every two months, the threshold will be revised.

Russia’s oil and gas industry accounts for roughly a third of its budget revenues. As a result, the country is changing how it calculates oil taxes by using a lower discount on the Urals grade in its assessments.

According to estimates provided by the Finance Ministry, the alterations that President Vladimir Putin approved earlier this week are anticipated to add 660 billion rubles, or $8.7 billion, to Russia’s budget this year.

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