FRANKFURT, Germany (AP) 鈥� Major Western measures to over the war in Ukraine took effect Monday, bringing with them uncertainty about how much crude could be lost to the world and whether they will unleash the hoped-for hit to a Russian economy that has held up better than many expected under sanctions.
In the most far-reaching efforts so far to target one of Moscow's main sources of income, the European Union is banning most Russian oil and the Group of Seven democracies has imposed a on Russian exports to other countries.
The impact of both measures, however, may be blunted because the world's No. 2 oil producer has so far been able and Turkey, although at steep discounts, and the price cap is near what Russian oil already cost.
As it stands, Russia will likely have enough money to not only fund its military but support key industries and social programs, said Chris Weafer, CEO and Russian economy analyst at consulting firm Macro-Advisory.
鈥淎t this price level, that outlook really doesn鈥檛 change much. But what is key is how much volume Russia would be able to sell," he said. "And that depends not only on the willingness of Asian buyers to continue buying Russian oil, but also what is the physical ability of Russia to shift that oil.鈥�
Western leaders are walking a fine line between trying to cut Russia鈥檚 oil income and preventing an oil shortage that would cause a price spike and and hurting consumers worldwide. They could later agree to lower the price cap to increase pressure on Russia, which says it will not sell to countries that observe the limit.
That could take oil off global markets and , including for gasoline at the pump. International benchmark Brent crude to $83.40 a barrel Monday.
To seriously cut Russian revenue, the cap must be lowered 鈥渜uickly and progressively," said Lauri Myllyvirta, lead analyst at the Finland-based Centre for Research on Energy and Clean Air.
Even the $60 cap, if enforced, would already push Russia to lower per-barrel tax, he said, calling it 鈥渂y far the biggest step to date to cut off the fossil fuel export revenue that is funding and enabling Russia鈥檚 barbaric invasion of Ukraine."
Russia has been living off the earlier this year and will be more vulnerable in the next several months when that money is spent, Myllyvirta said.
Kremlin spokesman Dmitry Peskov, asked in a conference call , said, 鈥淭he economy of the Russian Federation has the necessary potential to fully meet all needs and requirements within the framework of the special military operation, and such measures will not affect this.鈥�
The U.S., EU and allied countries have hit Russia with a slew of sanctions aimed at bank and financial transactions, technology imports and regime-connected individuals. But until now, those sanctions have for the most part not directly gone after the .
before the war and has had to scramble to find new supplies. Previously, the EU banned imports of Russian coal, and the U.S. and the U.K. halted their limited imports of Russian oil, but those steps had a much smaller economic impact.
Even as Western customers shunned Russian oil, the higher prices driven by helped offset lost oil sales, and Russian exporters have shipped more oil to Asian countries and Turkey in a major reshuffling of global oil flows. 鈥� but not by as much as many expected at the start of the war almost 10 months ago.
One unknown is how much of the oil formerly sold to Europe can be rerouted. Analysts think many, but not all, of the roughly 1 million barrels covered by the embargo will find new homes, tightening supply and raising prices in coming months.
The Biden administration doesn't expect that Russia鈥檚 threats to cut off countries observing the cap and slow production would 鈥渉ave any impact long term on global oil prices,鈥� National Security Council spokesman John Kirby said.
He said 鈥渢his cap will lock in the discount on Russian oil鈥� and countries like China and India would be able to bargain for steep price reductions.
Indian Foreign Minister Subrahmanyam Jaishankar indicated Monday that the country would to prioritize its energy needs. India so far hasn't committed to the price cap.
The cap has a grace period for oil that was loaded before Monday and arrives at its destination before Jan. 19 to minimize disruption on oil markets.
The measure bars insurers or ship owners 鈥� most of them located in the EU or U.K. 鈥� from helping move Russian oil to non-Western countries unless that oil was priced at or below the cap.
The idea is to keep Russian oil flowing while reducing the Kremlin's income. The U.S. and Europe than provoking financial distress in Russia.
French Finance Minister Bruno Le Maire said the cap was 鈥渨orth trying," adding that 鈥渨e will make an assessment of the efficiency of the old cap at the beginning of 2023.鈥�
Ukraine's President Volodymyr Zelenskyy had called for a price ceiling of around $30 per barrel. That would be near Russia's cost of production, letting Russian oil companies earn enough only to avoid capping wells that can be hard to restart. Russia needs some $60 to $70 per barrel to balance its budget.
Russia could use methods to evade the sanctions such as those employed by Iran and Venezuela, including using 鈥渄ark fleet鈥� tankers with obscure ownership and ship-to-ship transfers of oil to tankers with oil of similar quality to hide its origin. Russia or China could also organize their own insurance. Sanctions experts say that those steps will impose higher costs on Russia.
The new EU sanctions led the Italian government to take temporary control of the Russian-owned ISAB refinery in Sicily last week. The government stopped short of nationalization but put the facility, where about 20% of Italy鈥檚 oil is refined, under receivership to protect 10,000 jobs linked to the refinery and its suppliers.
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AP reporters Raf Casert in Brussels, Aamer Madhani in Washington, Sheikh Saaliq in New Delhi and Colleen Barry in Milan contributed.
David Mchugh, The Associated Press
