U.S. enforcement of the G7's price cap on Russian oil since October is hitting the price Russia can get for its oil in global markets and reducing revenues for its war on Ukraine, a U.S. Treasury official told reporters on Thursday.
The discount of Russian Urals crude oil to international benchmark Brent crude has risen about 40% since the U.S. started increasing enforcement of the G7's price cap by placing sanctions on tankers suspected of carrying Russian crude priced above the $60 a barrel cap.
The price cap imposed by the Group of Seven countries, the European Union and Australia bans the use of Western maritime services such as insurance, flagging and transportation when tankers carry Russian oil priced at or above $60 a barrel. The West imposed the mechanism after Russia's February, 2022 invasion of Ukraine.
The discount for Russian Urals to the Brent has widened from about $13 a barrel in October to about $18.50 a barrel now, the official said.
Since October, the Treasury Department has imposed sanctions on about eight tankers suspected of breaching the price cap.
The wider discount is a "meaningful link to the fact that the market is being more receptive to our enforcement and compliance actions around the price cap," the Treasury official said, on condition of anonymity.
Proceeds from oil and gas sales for Russia's federal budget fell by about 24% to 8.822 trillion roubles ($99.4 billion) last year, Russian finance ministry data showed on Thursday, following weaker oil prices and reduced gas sales to Europe.
Moscow however, has said it expected revenues to recover to 11.5 trillion roubles in 2024 as Russia has managed to redirect oil it used to sell to Europe to China and India.
The U.S. Treasury says that redirection of oil trade and other costs for Russia on using non Western services decreases it revenues to fight the war in Ukraine.
(This story has been corrected to say that the discount of Russian Urals crude oil to international benchmark Brent crude has risen, instead of fallen, in paragraph 2)
