Further restrictions by the West could trigger a humanitarian crisis in the poorest countries, according to a report
Western sanctions on Russian oil are proving to be ineffective, while attempts to further tighten the restrictions could undermine the global economy, French newspaper Le Monde wrote on Wednesday.
The report indicated that tightening sanctions on one of the major oil-producing countries could send fertilizer prices soaring and would ultimately lead to higher global food prices.
“The rise in oil prices would disproportionately affect the poorest countries, potentially pushing them into a humanitarian crisis,” US economist Catherine Wolfram was quoted as saying. Such a scenario could discredit the West in the eyes of the Global South and encourage them to strengthen ties with Russia, she suggested.
Meanwhile, the CEO of US-based ClearView Energy Partners, Kevin Book, told Le Monde that sanctions could have worked at a time when most companies specializing in oil transport insurance were located in the West. “This is not the case today,” he emphasized.
Western governments have hit Russia with a barrage of sanctions over the Ukraine conflict. Among other measures, they have introduced a price cap along with an embargo on Russian seaborne oil in an attempt to hurt the country’s economy, while at the same time keeping Russian crude flowing to global markets so as not to trigger price hikes.
The measures were imposed in December 2022, and were followed in February 2023 by similar restrictions on exports of Russian petroleum products. They ban Western companies from providing insurance and other services for shipments of Russian crude, unless the cargo is purchased at or below $60 per barrel, a level below the current market price.
In response, Moscow banned Russian enterprises from complying with the cap and rerouted most of its energy exports to Asia, particularly India and China.
“While some measures have long-term effects, such as the ban on the export of spare parts that hinders the maintenance of military equipment, the opposite is true for oil,” Le Monde wrote, suggesting that Moscow has been successful in sidestepping the restrictions while the price of the country’s flagship Urals crude had mostly remained above the Western price cap.
Reuters calculations based on traders’ data showed that prices of October Urals crude oil were trading above $65 a barrel at Russian Baltic and Black Sea ports. In July, Russian crude traded at around $80 a barrel.
According to a recent report by the independent economic think tank Institute for Energy and Finance Foundation (FIEF), Russia’s energy revenues may reach record levels this year, buoyed by high export oil prices. Income from oil exports jumped by 63% in January-July this year compared to the same period in 2023, totaling 6.4 trillion rubles ($66 billion), the paper said.
