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The United Kingdom, along with its Group of Seven (G7) allies, is considering revising and strengthening oil sanctions against Russia, The Guardian reports. The reason is the sharp drop in global oil prices amid Donald Trump’s trade war, which has made the current price cap on Russian oil exports virtually irrelevant.
The current restriction has lost its meaning
The current limit of $60 per barrel set in 2022 by the G7 and the EU for Russian oil no longer meets market conditions. For the first time in four years, Brent crude fell below this level to $59.77 per barrel.
Analysts argue that the price restriction, which was once intended to deprive Russia of resources to finance its war against Ukraine, now looks “meaningless”. Moreover, Russia has long since learned how to circumvent sanctions by using a “shadow fleet” of old tankers and selling oil at regular market prices outside the sanctioned jurisdiction.
London and G7 prepare a new scenario
According to The Guardian’s sources, the UK Treasury is considering lowering the limit to $60, and possibly even lower – to $50 per barrel. This decision is being coordinated with G7 partners and aims to achieve both:
– to reduce the Kremlin’s revenues;
– to force Moscow to participate in a real peace process;
– maintain control over the market and avoid oil shortages.
“It may be time to rethink the whole strategy of limiting Russian oil and gas revenues. No matter how much they deny it, the scheme has clearly not worked,” said Tom Keating, director of the Royal United Services Institute for Defence Studies in London.
Why the oil price is falling
The main reason for the fall in global energy prices was the Trump administration’s global trade war. New US duties on goods from various countries, primarily China, have triggered fears of a global economic recession and a decline in oil demand.
The global benchmark Brent fell from almost $75 per barrel last week to less than $60 on Wednesday. After Trump announced a 90-day pause in tariffs (excluding tariffs against China), the price rose slightly to $65 per barrel.
What’s next?
London and Brussels recognise that the current strategy of limiting Russia’s oil revenues needs to be decisively updated.
“The G7 is ready to tighten the screws on the Kremlin. There is no risk of an oil shortage – but there is every chance of hitting Russia’s military machine now,” said Clayton Siegle of the Centre for Strategic and International Studies in Washington.
New proposals to reduce the price cap are expected to be presented at the next meeting of G7 finance ministers.
