because the war on Putin is now at a turning point- Corriere.it

because the war on Putin is now at a turning point- Corriere.it
because the war on Putin is now at a turning point- Corriere.it
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A cap on the price of Russian oil may prove to be a turning point with profound and partly unpredictable consequences, for at least two reasons. First, such a measure can bring about a financial strangulation of Russia more effective than any other sanction enacted up to now; more effective, too, than a possible ceiling on the price of gas in Europe. There is also another category of consequences, even less predictable: applying such a measure to Russia’s oil, the first or second largest exporter in the world until 2021, accelerates the globalization of the conflict for Ukraine with repercussions that may get directly to China, India and all countries that are neutral or close to the Moscow regime.

The condition for the price ceiling to work

Naturally the condition that, after the G7 agreement, all the governments of the European Union give the green light and the measure enters into force as foreseen: from 5 December for crude oil and from 5 February for refined products. At that point the “ceiling” would work, in all likelihood, on the basis of the threat of secondary sanctions against companies in any other country that violates the rules set out by the United States, the European Union, Japan, Canada and Great Britain.
In essence, the West and its allies would seek to impose their cordon sanitation on Russia on all countries of the world. The “cap”, let’s imagine set at 50 dollars a barrel, would most likely work as follows: if a Chinese or Indian company bought Russian oil at 60 or 70 dollars a barrel – that is, above the maximum levels indicated by the West as acceptable – then it would lose access to dollar and euro markets. the same kind of threat that weighs today, for example, on European banks that were to do business with Iran: they know they would be immediately cut off from American markets, so they refrain from coming into contact with intermediaries in Tehran.

The risks for the countries allied with Russia

With the G7 agreement, the companies of all countries that are neutral or allied with Russia (China in particular) automatically end up under threat of sanctions. It is possible that they will try to circumvent them with hidden or off-shore payments, especially if the Beijing regime gives indications to this effect to any of its subsidiaries. But so the fallout from the war in Ukraine is bound to give rise to a global conflict between intelligence systems, to escape sanctions or to hunt down any companies that bypass them. It is certain that the threat of secondary sanctions by the West is already having an effect. Chinese tech firm Huawei, for example, has stopped signing new contracts in Russia for fear of being excluded from European markets.

In 2023, Putin may have fewer resources

From December, therefore, if the “ceiling” works, the consequences for Vladimir Putin’s regime can become heavy as never before. For Moscow’s public budget, oil and gas account for about 45% of revenue, thanks to taxes on extraction and exports. Traditionally, about two thirds of them have always come from oil and only a minority from gas. With the preparation of a Russian gas cap in Europe and the drastic reduction in supplies already underway, methane revenues could be greatly reduced. And the “cap” on oil could severely reduce the main Source of income as well. In 2023, Putin could have far fewer resources to pay the salaries of his soldiers in Ukraine, reward the families of the fallen, and invest in new weapons and equipment. With the “ceiling” on oil, the economic war between the West and Russia enters a new phase: tougher and more global.

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The article is in Italian

Tags: war Putin turning point Corriere .it

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