07/10/2023
'Ineffective' Western price cap on Russian oil still sets dangerous precedent, expert tells RT
Washington is conducting its economic policies at the expense of other markets, a Malaysian economist has said
https://www.rt.com/business/584184-russia-western-sanctions-ineffective/
Western sanctions imposed on Russia have sent a message to other nations that if they “misbehave,” they could easily become the next target, Benedict Weerasena, the research director at Malaysian think tank Bait Al Amanah, has warned.
In an interview with RT on the sidelines of the Valdai Discussion Club in Sochi, he questioned the effectiveness of the $60-per-barrel price cap imposed on Russian oil by the EU, G7, and allied countries last December, along with an embargo on exports of the country’s seaborne crude.
“It’s important to understand the reality of the price cap. Is it really effective? Can it be implemented considering how the Opec system and global tanker trade works? If sanctions don’t work in reality, then what is the purpose of them in the first place?” Weerasena said.
According to him, countries in South East Asia, especially in emerging market economies, do not support the sanctions on Russia and fear that in the future, restrictions imposed by the US and other Western countries could be directed against Asian oil exporters.
“Countries like us in Malaysia who are oil-exporting countries, we’re concerned that if this [oil trade] could be weaponized, will this be weaponized against us in the future?”
This young Malaysian economist is spot-on.
The very reason why Saudi Arabia “switch side” is precisely because of the oil price cap imposed on Russian oil. Being the biggest oil-producing country, Saudi Arabia rightfully feels that it is the country that will determine the optimum supply of global oil via Opec so that the price of oil is in equilibrium via the market forces of supply and demand.
And then comes along the US which is not among the biggest oil producing countries, and hence is not a member of Opec, being trigger-happy in setting a price cap on Russian oil, which is one of the biggest oil producing countries.
The Saudis are very angry with this because they rightfully feel this oil price cap of the US will only cause global demand and supply of oil to go haywire, and in turn will affect negatively the world economy.
More importantly, if the US can weaponise oil against Russia, then there is no telling that it can do so to Saudi Arabia in the future, notwithstanding the US and Saudi Arabia are close allies. Anyway, a country by right should not be meddling in the affair of its ally’s forte.
For the uninitiated, the US oil price cap imposed on Russia means that things will be as per normal if global oil price is below US$60 per barrel. The moment it rises to above US$60, all countries that buy and sell Russian oil at that price will be subjected to a “sanction” in the form of the refusal of the US and its western allies to provide such countries the required insurance services that accompanied the sale of Russian oil, thereby affecting even the needed logistics of the sale.
The only way to avoid the sanction is for the transaction to proceed on the basis of US$60 even though market forces hv determined the price to be more than US$60, thus shortchanging the Russian.
This is the rule-based world order spearheaded by the US and its western allies - making rules according to their whims and fancies - that is about to crumble. The alternative is the vision of a multipolar world based on international laws as enunciated by Russia, India and China.
Russia has defied this cap from day one. When the global price of oil hit US$65 some time ago this year, all countries esp China and India still bought Russian oil at that price, ignoring the US price cap. And today when oil prices are about to hit US100, the US oil cap remains impotent.
The young chap in the Malaysian think tank is questioning why is the cap still maintained when it is proven to be useless.
Why, why, why… and why ….
The simple answer is the only hegemon in the unipolar world is too ashamed and embarrassed to admit defeat … sigh.. and do away with failed policies ….
By the way Russia is now able to handle its own insurance cover and logistics for its oil trade, and can manage this trade on its own without being dependant on the west’s swift system, insurance and logistics. Sanctions have forced Russia to be self sufficient, as the adage goes necessity is the mother of invention. Wonder who is the father … hehe..
Wondering too whether this is affecting the London-based insurance giant Lloyd's of London.
Lastly one reason why Russia manages to overcome this price cap is the EU countries themselves. Despite the sanctions on Russian oil in general, and the price cap in particular, the EU is still buying Russian oil big time. What a hypocrisy!!!!
https://www.rt.com/russia/577056-western-states-buy-russian-energy/
https://www.rt.com/business/581654-russian-oil-eu-g7-price-cap/
https://www.rt.com/business/583814-russia-oil-cap-working-yellen/
Oil exporters in Asia don’t support the price cap on Russian oil, which has proved ineffective, the head of a Malaysian think tank says