Let’s consider the subsidies Moscow currently pays to keep its restive regions quiet. The payouts are critical in places like Chechnya, where warlord Ramzan Kadyrov runs the territory as a de facto client state within Russia. Without cash from Moscow, Kadyrov has warned: “We won’t be able to last three months — not even a month.”
This is a vulnerability that Europe and the U.S. should really exploit. And the quickest way to do so is to lower the G7’s “oil price cap” on Russian crude exports.
First proposed by the EU, and marketed as a tool to curtail Moscow’s earnings, the G7’s “price cap” actually grants Russia a major sanctions loophole. As it stands, so long as it sells oil under the cap of $65 per barrel, the Kremlin can earn as much revenue as it likes without penalties.
For example, just last month, when the market price for Brent briefly fell below $70 per barrel, Russia barely had to discount some of its crude. And on account of these licit sales (and illicit ones via embargo runners), money has poured into Moscow’s coffers.
Each month, Moscow collects around $9 billion in tax revenue from these sales, including around $1 billion from the EU. And every billion the Kremlin makes from energy sales represents a billion it doesn’t need to withdraw from the NWF to balance its budget, bolster regime support and pay for its war against Ukraine.
It’s time to tighten the financial screws on Russia by lowering the oil “cap” down to $30 per barrel — near Russia’s true production costs — and for both Europe and the U.S. to be tougher in enforcing sanctions on illicit oil buyers in China, India and Turkey.
This should be a top priority when European leaders sit down with the next U.S. administration. Targeting Putin’s financial weakness in this way will help Ukraine prevail.
