The upper price limit (so-called “price cap”) for exported Russian oil should not exceed $35 per barrel, which is almost $50 below current market prices. Introducing a price cap at this level will create significant financial pressure on Russia due to reducing oil and gas revenues to $100 billion annually. At the same time, the level of $35 is twice the cost of production of Russian oil, which will keep the incentive for the Russian Federation to export it and relieve the global market from the shortage of supply. 

The International Group on sanctions against Russia stated this in the working document entitled “Introduction of an upper price limit for oil.“

The document also considers scenarios of introducing price caps at $75 and $55 per barrel, respectively. In the first option, a high price cap on Russian oil prices will allow Russia to receive $230 billion from oil and gas exports, which is even worse than the current status quo. In the second, the income will be about $166 billion, which will create certain problems for the balance of payments but will not be enough to deprive the aggressor of the opportunity to finance the military campaign.

From December 5, 2022, the EU oil embargo against Russia will come into force. At the same time, the embargo should be supplemented by a mechanism for introducing a price cap of $35, due to which the Russian Federation will be deprived of a significant part of the cash resources to continue financing the war against Ukraine.

Introducing a price cap will also affect Russia’s access to Western oil transportation services and tanker insurance. The document’s authors assume that the tankers insured by the structures belonging to the International Group of Mutual Insurance Clubs will stop transporting Russian oil, which they will try to sell above the price cap. At the same time, in October 2022, 75% of Russian exported oil was transported by such tankers.