Ukraine war: West sets oil price cap and Russian crude ban in bid to choke Putin's profits

ITV News business and economics editor Joel Hills analyses the latest sanctions

Since it peaked at $120 a barrel in June, the market price of oil has been falling, pulling down the price of petrol and diesel at the pumps.

But this trend may not continue as the UK and the EU stopped buying shipments of crude oil from Russia on Monday in one of the most far-reaching efforts so far to target one of Moscow's main sources of income.

The EU is banning most Russian oil, and the G7 has imposed a price cap of $60 a barrel on Russian exports to other countries as the West moves to limit Vladimir Putin's oil profits over the war in Ukraine.

In theory, if countries who trade with Russia pay more than this they will be denied access to European tankers and insurance. In practice, it's not clear how effective the cap will be.

Before the war, Russia was Europe's biggest oil supplier by far, sending 2.5m barrels a day to their western neighbours, most of it from ports in the Baltic and the Black Sea.

Oil sanctions are designed to hurt Russia financially but the impact may be blunted because Russia has been selling more of its oil - although at steep discounts - to countries including China, India and Turkey.

Plus, the $60 price cap is near what Russian oil already cost.

Western leaders are walking a fine line between trying to cut Russia’s oil income and preventing an oil shortage that would cause a price spike, worsening the inflation plaguing economies and hurting consumers worldwide.

At the outbreak of Putin's invasion of Ukraine, the UK, US and EU hit Russia with a raft of sanctions aimed at bank and financial transactions, technology imports and regime-connected individuals.

These latest sanctions are the first to directly go after the Kremlin's biggest money-maker, oil and natural gas.

Russia's economy has shrunk in the 10 months since the war, but not by as much as many expected.

And the embargo does not include Russia's DRUZ-BA pipeline which runs into Europe, supplying countries like Germany, Poland, the Czech Republic and Hungary.But more sanctions are on the way. In February, the EU will ban imports of refined Russian oil products like gasoline and diesel.

Energy Aspects calculates that all of these measures combined will force Russia to cut oil production from 11 barrels a day to 9 million barrels next spring, costing Vladimir Putin billions of dollars a year in lost sales.

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