Russia dismissed the G7 oil price cap as an ineffective tool as its oil revenues have soared amid a global supply squeeze.

The G7 nations introduced a $60 crude price cap in December 2022 to limit Russian revenues. European shipping interests are in breach of sanctions if they haul barrels sold above the cap.

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But the growth of a fleet of shadow tankers hauling Russian crude outside of the G7’s control has allowed the trade to continue, predominantly to India, Turkey and China.

“I hope that everyone is convinced now that the instrument that they have contrived is simply ineffective and end consumers suffer from it,” said deputy prime minister Alexander Novak, according to Russian news agency Interfax.

Global oil prices have risen after Saudi Arabia announced production cuts of 1m barrels a day and Russia reduced pumping by 300,000 barrels a day. The cuts are due to continue until the end of the year.

Russian Urals, the country’s primary export grade, was trading at $80.57 a barrel on Tuesday, up 4.4% on the day.

US Treasury secretary Janet Yellen admitted last week that the price cap scheme was working less well because of the price rises.

“It does point to some reduction in the effectiveness of the price cap,” she told reporters but insisted that Russia had been forced to spend time and money to provide ships and services to move its oil.

The International Energy Agency reported that Russia’s oil export revenues in August reached their highest levels since October, up $1.8bn from the previous month to reach $17.1bn.

Analysts say that European tanker operators and insurers had continued to be involved in the trade after prices topped the $60 crude cap in July.

Shipowners and insurers rely on documents showing that oil is sold below the price cap, which brokers have said are easily faked.

Critics of the price cap scheme say it has been undermined by the failure of sanctions regulators to enforce any breaches, with no penalties announced about the Russian regime.

Yellen said the G7 would consider “over time” if there were ways to make the policy more effective, Bloomberg reported.

Meanwhile, Russian news reports indicated that Moscow was set to ease its restrictions on diesel exports because of a lack of storage space.

Fuming farmers

The measures were introduced last month because of concerns over domestic prices and supplies, with farmers complaining of fuel costs at harvest time.

Business daily Kommersant said a meeting between oil companies and Novak on Wednesday was set to discuss measures to ease diesel exports but not gasoline.

Last week, Russia’s energy minister Nikolai Shulginov said that expectations of a swift lifting of the ban on most motor fuel exports were “futile”.

Analysts warned that any long-term shutdown of exports would affect the product tanker trade, with ex-Russia MR tankers looking for alternative employment in Atlantic trades.

The Baltic Exchange’s average time charter equivalent rates for MRs in the Atlantic stood at $23,816 per day on Tuesday after a volatile trading month. That represented a decline of more than $10,000 daily from the start of September.(Copyright)

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