Estonian Oil Association chief: Russian price cap will have little impact

Mart Raamat.
Mart Raamat. Source: Private collection

The price cap on Russian oil will have a very limited, if not non-existent, impact on Vladimir Putin's ability to finance his military campaign, says Mart Raamat, head of the Estonian Oil Association. Raamat believes the move is more a case of political posturing.

On Friday, EU countries reached an agreement to cap the price of Russian oil at $60 dollars a barrel. From December 5 onwards, shipments to third countries of oil bought from Russia at a higher price.

However, head of the Estonian Oil Association Mart Raamat told ERR, that he believes the decision was primarily political maneuver. According to Raamat, the price cap was imposed by the EU and the other major G7 industrialized countries as a sanction (against Russia), but, by its very nature it will also have an impact on third countries.

"All the big Western countries - the EU, the UK and the US - have already given up or are giving up imports of Russian oil and so imposing this price cap does not really affect their oil supplies," Raamat explained. "Their point, however, is to influence oil importers from third countries to pay less for Russian oil."

Raamat singled out China, India and Turkey as major partners, whose imports would likely be affected by the decision, noting that the price imposed is higher than the amount currently paid for Russian oil. As a result, it will therefore be very difficult to predict how many third countries will participate in imposing the price cap.

According to Raamat, Europe and the West are hoping, that as the EU will also ban the insurance of vessels transporting Russian oil at more than $60 dollars a barrel by European insurance companies, this may act as an incentive for third countries to join in with the price cap.

"However, the actual this will have on Putin's ability to finance his military campaign, is still not very well understood," said Raamat, adding that he believes it will be limited at best.

What the price cap is intended to achieve remains quite unclear, according to Raamat, who suggested that Western countries may have backed down somewhat under pressure after Russia sent a clear message that it would no longer supply oil to countries which signed up to participate in the price cap.

However, according to Raamat, the price cap which has been set is such, that Russia will continue to receive the same price on the world oil market as it has up to now, and has most likely planned when considering its national budget for next year.

"So, the impact is practically non-existent and, in fact, it seems that it may have been more a political move than a meaningful sanction," he said.

Raamat added, that he, along with many other analysts, finds it difficult to see how a price cap would actually reduce Russia's ability to generate export revenues from oil.


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Editor: Michael Cole

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