Is the West hopeless with sanctions against Russia?

(Dan Tri) – Experts argue that the West’s order to cap Russian oil prices has been successful, but like other sanctions, Moscow will gradually overcome their impact.

Experts argue that the Western order to impose a price ceiling on Russian oil has been successful over the past year but will gradually lose its effectiveness (Photo: Bloomberg).

The Russian oil price ceiling order continues to become a hot topic at the US-EU summit in Washington D.C.

Supporters of the price ceiling say it is an important tool to tighten Russia’s budget for the conflict in Ukraine, while critics believe Russia can easily bypass this measure.

On Foreign Policy, Agthe Demaraissenior, geoeconomics policy expert at the European Council on Foreign Relations, said that both opinions are correct.

But looking at the history of other previous sanctions, Ms. Demaraissenior concluded that Moscow will likely gradually find a way to overcome the price cap measure and gradually neutralize it.

There is no black and white answer

The US, EU and allies have three goals when imposing a price ceiling on Russian oil, including: Showing solidarity;

Considering these three goals, Ms. Demaraissenior said that the order to cap oil prices was successful.

This may not be entirely due to the oil price cap, but overall, oil prices remain below 2022 levels for most of 2023, despite OPEC production cuts.

After G7 sanctions, Russia has accumulated a huge fleet of oil tankers to circumvent restrictive measures (Photo: Bloomberg).

The oil price cap has also separated Russia’s oil market from the global market, creating a gap between global prices and the prices Russia can get.

Moscow’s insurance and transportation service costs are also higher.

The oil price cap has been effective for about a year, but the history of other sanctions makes it clear that Russia will find a way to overcome it in the long run.

Over the past year, Moscow bought about 110 Aframax tankers to build a specialized tanker fleet to make it difficult for the West to track their whereabouts and avoid sanctions.

Russia has also redirected trade flows from Western economies to countries not participating in sanctions.

The US government has identified Russia’s Kozmino oil loading port as a possible sanctions violation location (Photo: Getty).

Sanctions are a marathon

In addition to lowering the price cap below $60, supporters of this measure currently offer many suggestions for solutions, but none are complete.

The first is to strengthen enforcement work.

For example, the West can increase inspection of documents that companies in the G7 and EU must provide to show that they are not involved in Russian oil lots sold above the ceiling price.

But that measure does not solve two problems.

Another way is to `capture` Moscow’s oil tankers.

This is not without precedent: Türkiye once required oil tankers passing through the Bosporus Strait to present the above type of insurance from a company with a large amount of capital.

Assuming no reputable company accepts insurance for Russian ships, this plan will be a short-term setback for Moscow.

Under G7 price ceiling regulations, Western companies are allowed to provide services such as transportation or insurance only if Russian oil is sold for less than 60 USD/barrel (Photo: Getty).

The strongest proposal is to punish Russian oil companies and international businesses that help avoid the price cap.

For example, when punishing Russian aluminum producer Rusal in 2018, Washington also imposed secondary sanctions, putting every company doing business with Rusal at risk of being affected.

The ripple effect of the Rusal sanctions on the global manufacturing supply chain is so severe that Washington has no choice but to lift the measures.

Directly sanctioning the Russian oil company would have a similar impact, as Russia accounts for about 12% of global oil supply, nearly double Rusal’s share of global aluminum production.

If we only punish companies that help Russia avoid the price ceiling, this measure will not cause major consequences but will only have limited effectiveness.

The best long-term option is measures to prevent Russian oil companies from accessing Western technology, according to Ms. Demaraissenior.

`Sanctions are a marathon, not a sprint,` Ms. Demaraissenior said.