Since the war began in February the West has grappled with a dilemma. How should it cut Russia’s fossil-fuel earnings, without reducing the global supply of oil and fuelling inflation that hurts consumers around the world?
the invasion of Ukraine, oil money continues to fill Vladimir Putin’s war chest. Even as the West has imposed sanctions, Russia’s crude exports have held up and the Urals oil price remains close to its average in 2014-20. Russia’s current-account surplus this year is expected to be $265bn, second only to China’s. But the story is not over yet. On December 5th the European Union will at last implement a plan originally cooked up in May. It will ban seaborne imports of Russian oil.
Yet even as the ban was announced a flaw was apparent. If Russian oil fails to make it to market, then global oil prices may spike, hurting Western consumers. Hence America’s Treasury department has since devised a cunning plan to water it down: to let European firms continue to offer their services, provided the oil involved is bought at a suppressed price set by the West.
According to hard-headed oilmen, however, life rarely turns out so neatly. There are two uncertainties. One is how Mr Putin responds if European firms really do have a stranglehold and can block his ability to get some oil to market. Russia has already said it will refuse to use tankers that join the oil-cap scheme. It could cut its oil exports, relying on a smaller group of non-Western tankers and insurers, and sending global prices spiralling.
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