Japan and G7 to tighten Russian oil price cap amidst evasion of Ukraine sanctions

Less than a month before the close of 2022, the G7 nations, European Union, Australia, Norway, and a host of other countries adopted a maximum price cap on Russian oil purchases. A provision of the deal states that oil, which is a crucial revenue source for the Putin regime, cannot be bought for more than £45 per barrel.

The Japanese Ministry of Finance is advocating for the tightening of this price cap, as reported by kommersant.ru, referencing the Japanese paper "Nikkei". Based on media coverage, this proposition has the backing of the G7 nations, European Union, and Australia. The new cap is set to become effective from February 20, 2024.

Despite accruing sanctions tied to the war in Ukraine, millions of barrels of fuel derived from Russian crude oil are still entering Great Britain, as reported by the BBC.

The intrigue lies in the fact that Russian crude oil undergoes refining in third-countries, chiefly India, and the resultant products are then sold to Great Britain. The BBC highlighted that this process, while indirectly undermining the sanctions intended to curb Russian war funds, is not illegal and does not break the British prohibition on Russian oil imports.

The UK government refutes claims of Russian oil imports since 2022. A government spokesperson did concede that the universally acknowledged "rules of origin" stipulate that crude oil becomes categorically linked to the country it was refined in for trade purposes after having been refined.

The Energy and Clean Air Research Centre (CREA) observed that this "refinery loophole" provides countries like India and China, who haven't enacted sanctions against Russia, the opportunity to legally import, refine Russian crude oil, and produce petroleum products such as jet fuel and diesel. These products are then exported to the UK and EU.