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Almost All Russia’s Oil Sold Above the Price Cap Last Month

(Bloomberg) -- Russia exported almost all its oil cargoes at a price that exceeded a Group of Seven-imposed price cap last month, the latest sign that western sanctions are now failing to restrict Moscow’s access to petrodollars.

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More than 99% of the nation’s seaborne was sold at prices well above a $60-a-barrel threshold set by G-7 nations almost a year ago, a study of detailed trade and shipping data by KSE Institute shows.

Exports from major Russian ports reached an average price of $79.40 a barrel at the point of export, according to the institute, which is part of the Kyiv School of Economics that’s pushing for stiffer sanctions against Russia.

G-7 introduced the price cap of $60 a barrel on Russian crude in December to limit the inflow of petrodollars and Kremlin’s ability to finance its war in Ukraine.

The threshold is supposed to prohibit firms in G-7 nations from providing services including shipping and insurance for cargoes sold above the cap.

It helped to curb Russia’s oil revenue in the first months of year year but effectiveness has waned. Russia has been relying more on a shadow tanker fleet with unclear owners and insurance, boosting its proceeds from oil in recent months.

There are signs that G-7 nations are reacting. The US has now sanctioned five tankers for price-cap breaches and written to companies around the world regarding about 100 vessels that could have violated the measure.

The European Union is also taking steps that will make it harder for companies to selling tankers into the shadow fleet.

It remains unclear whether western powers would be willing to take measures that would ultimately restrict the supply of Russian petroleum, driving up prices.

Almost 30% of all seaborne crude oil was shipped with protection and indemnity cover from G-7 and EU nations, or relied on other services from Western nations in October, according to the KSE Institute.

Shipping companies and insurers ultimately have to receive attestations from traders affirming that the cargo complies with the price cap. There is no real way for them to check and it is known that Russian oil prices have exceeded the threshold for months.

“This points to widespread violations of the price cap regime in the form of ‘attestations fraud’,” the researchers said. “This means that oil traders and brokers are likely providing falsified pricing information to G7/EU service providers.”

The researchers outlined measures that they said could make the cap more effective. Those include stepping up penalties on entities that violate the policy or facilitate such violations, as well as ensuring that price cap coalition service providers have sufficient proof on oil prices.

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