By Suryaputra Wijaksana*
The oil ‘price cap’ of US$60 per barrel for Russian oil is a controversial move by the European Union and G7. The price cap prohibits Western insurers and shipping companies, which account for more than 90 per cent of the marine insurance industry, from servicing vessels that carry Russian oil above US$60 per barrel.
The intention is lofty — prevent Russia from profiting from high global oil prices, but provide enough incentive for Russia to continue supplying oil, especially to vulnerable countries in Africa and Asia. Yet the price cap can be destabilising and have unforeseen consequences.
Current buyers of Russian oil, namely India and China, can demand even steeper discounts on shipments because they know Russia has limited options. In addition to weakening global demand, this may push global oil prices down in the short run, putting Russia in a tight spot. If its oil prices fall below…
