US: Sanctions on Russian oil are working; Kremlin revenues halved in first half of year

The price cap on Russian oil, agreed by G7 and EU countries at the end of last year, is helping to reduce not only Russia’s oil revenues but also its production, according to US government officials. Compared with last year, Russia’s oil revenues in the first half of the year fell by half, and Russia also has to invest more in ways to circumvent the sanctions.

Russian oil traders have faced sanctions imposed by G7 and EU countries since the end of last year. These set a maximum price at which they can sell their oil. The price caps are enforced through shipping and cargo insurance: Russian traders can use the services of Western companies only if they comply with the cap.

This means, however, that not all Russian exports are subject to the price cap, since not all companies active in these sectors are required to comply with it. But as sanctions were introduced last year, demand for Russian oil began to fall and Russian traders themselves often had to offer it at a substantial discount to other suppliers to make it attractive enough to potential buyers.