The study examines the introduction and early effects of the price cap imposed on Russian oil by the G7 and its allies. Unlike traditional price caps, which typically disrupt supply by making production less profitable, this measure was specifically designed to curtail Russian oil revenues without triggering a global price surge. By allowing Russian oil to continue flowing to the market but at a fixed price, the policy aims to weaken Russia’s economic capacity to sustain its war efforts while maintaining stability in global energy markets. Implemented in December 2022 for crude oil and February 2023 for refined products, the cap limits Russian crude to $60 per barrel, with refined products falling within a $45 to $100 range.
Initial findings suggest the cap has achieved its intended effects. In early 2023, Russian oil-related revenues fell by 49% compared to the March-November period of the previous year, yet production levels remained stable, even increasing in some cases. Global oil prices did not experience the sharp rise that some analysts had predicted, suggesting that the cap successfully constrained Russian earnings without compromising supply chains. Despite sanctions, a significant portion of Russian shipments—around 60% of crude oil and 75% of refined products—continued to be handled by service providers from coalition countries, including the EU, G7, and Norway.
However, concerns remain over the long-term sustainability of the cap’s impact. While initially effective, the political will to further lower the price ceiling has weakened, reducing its deterrent effect on Russian revenues. Additionally, changes in Russia’s tax policies may allow the government to recover some of the lost income from oil sales. There are also risks of non-compliance and fraudulent reporting, as some traders may manipulate documentation to sell oil above the capped price.
Looking ahead, the study suggests that while the cap has been an effective tool for restricting Russia’s financial inflows in the short term, its long-term efficacy depends on enforcement measures and the willingness of coalition members to adjust the policy as needed. If properly maintained, it could serve as a model for economic sanctions that minimize collateral damage while exerting financial pressure on targeted states.
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