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Russia’s revenue from the sale of crude oil has sagged considerably since the implementation of the price cap by Western countries, the U.S. Treasury Department said on Thursday in a post on its website.
“The Price Cap on Russian Oil: A Progress Report,” published on Thursday by the U.S. Department of the Treasury, tells a story of “two seemingly contradictory goals”: restricting crude oil revenues and maintaining the supply of Russian crude in an effort to choke off Russia’s funding for its war in Ukraine. The story, according to the U.S. Treasury Department, is a happy tale in which “the price cap is achieving both goals.”
While Russia’s crude oil exports have continued to flow, ensuring market stability, Russian crude oil prices have dropped off significantly, the Treasury Department said, cutting into the country’s revenue stream, which is largely dependent on the sale of crude oil. The Treasury acknowledges the period of time following Russia’s invasion of Ukraine, where higher crude oil prices handed Russia a windfall in profits. But the price cap remedied the situation, the Treasury claims, “which allows for low-and middle-income countries to purchase oil while at the same time making it increasingly challenging for Russia to finance its aggression.”
The price of Russia’s flagship Urals grade also climbed higher after OPEC+ announced it would cut oil production further. In addition, Russia’s Deputy Finance Minister Vladimir Kolychev said in April that Urals was trading near $60 per barrel, indicating that Russia’s 2023 crude oil revenues could actually be higher.
Russia’s response to the price cap was a threat that it would refuse to sell oil to any country that enforced the cap.
Barron’s commentator Ben Cahill said in April that Russia was exporting its crude oil abroad at the same rate as it was before the invasion of Ukraine.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.