In an article for NV on May 2, Russian energy market expert Mikhail Krutikhin explained why the G7-imposed $60 oil price cap does little to stem Moscow’s oil revenues.

Russian exporters have clearly learned to bypass the $60 per barrel price cap set by Western governments on sales of Russian oil.

According to Krutikhin, Russia uses a “chain of intermediaries” to achieve this. The so-called first sale occurs when oil is loaded onto a tanker at a price below $60 per barrel. Such a tanker has all the necessary documents, and its cargo could even be insured by a member of the London P&I Club.

However, on the way to buyers in India (which frequently purchases Russian oil), the tanker’s contents increase in price because the oil is resold from one intermediary company to another during the voyage. These schemes can involve dozens of firms, some created by corrupt Russian officials and others by the oil exporters themselves. As a result, the crude will cost approximately $75-$78 per barrel by the time it reaches the destination.

Krutikhin explains that Western sanctions come into effect only if a vessel carrying oil priced above the cap is caught. However, catching, proving, and punishing these violations is beyond the administrative resources of countries like the United States, given the hundreds of vessels involved in the overall scheme.

“So far, only about 50 tankers have been sanctioned, which is laughable considering the hundreds of tankers engaged in these operations,” Krutikhin says.

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