G7 price cap on Russian oil is costing Putin £140m a day

THE price cap on Russian oil imposed by the G7 group of nations is costing the Kremlin about £140m a day.

Russia’s earnings from fossil fuel exports fell 17pc in December, to the lowest level since the country’s invasion of Ukraine, according to a report from the Helsinki-based Centre for Research on Energy and Clean Air.

The cost to Vladimir Putin’s regime will rise to about £246m a day when the EU’S ban on refined oil imports comes into force on Feb 5.

The price cap will also be extended to refined oil and pipeline oil imports to Poland will be reduced from this date.

Russia is still making an estimated £565m a day from exporting fossil fuels but this is down from a high of £883m in March to May 2022.

The EU, China, India, Turkey and Japan were the largest importers of Russian fossil fuels in the first week of January. The Research on Energy and Clean Air report said the G7 oil price cap at $60 a barrel has led to a 12pc drop in Russian crude oil exports and a 23pc drop in sales prices.

This has resulted in a 32pc drop in Russian crude oil revenues in December.

However, Russia has earned about £2.7bn from transporting crude oil on vessels subject to the price cap, resulting in approximately £1.8bn in tax revenue for the Kremlin.

The group said lowering the cap to $25-$35 per barrel would almost completely eliminate the tax income by putting the price much closer to Russia’s cost of production.

The current price cap is above the market price for Russian oil and remains in the range of what Moscow needs to balance its budget.

Kremlin spokesman Dmitry Peskov said yesterday that he viewed such assessments with scepticism. He noted that in case of lowering the cap, “Russia will do everything to protect its interests,” adding: “Russia will balance its interests, and the market would allow [it] to do that.”

Russian finance minister Anton Siluanov said at a Cabinet meeting on Tuesday that last year’s revenue was higher than planned thanks to oil and gas prices exceeding expectations. He said the government had used the extra revenue to increase social spending.

Western governments have struggled to find a way to cut into the fossil fuel income that is the main funding source for Russia’s government budget and its military action in Ukraine. Early rounds of sanctions mostly avoided blocking oil and natural gas shipments because the EU had been heavily dependent on Russian fossil fuels to run its economy.

The G7 nations came up with the price cap as a solution to keep Russian oil flowing to other parts of the world and avoid sharply higher energy prices while still cutting into the Kremlin’s income.

The cap is enforced by barring insurers from handling Russian oil shipments priced above the cap.