Opinion: The next few days will be crucial for the global economy | Stephen Bartholomeusz
The Europeans are struggling to agree on the price at which Russian oil should be capped when the G7 sanctions come into force next Monday. What they decide could have implications for not just Russia or the war in Ukraine, but for the global economy.
The financial sanctions involve bans on insurance, finance and other services for anyone transporting oil at prices above the cap which, given the dominance of the UK, Europe and the US of those services and their ownership of the tanker fleets, would have a significant impact on Russia’s ability to sell its oil.
Substantial reductions in purchases of Russian oil by the Europeans and other western nations have so far been largely offset by record volumes of Russian oil being sold to China, India and Turkey, with China the major buyer. In volume terms, there are estimates that Russia’s sales have fallen only about 2 per cent from their level ahead of the invasion.
The imminent imposition of the bans on insurance and other services for Russian cargoes carrying crude purchased above the price cap also seems to have had something of a chilling effect on the availability of transport for Russian oil, albeit not as significant an effect as would be the case if a cap at the lower end of the current discussion were to be introduced.
In any event, the widespread outbreaks of COVID in China and its reflex response – lockdowns impacting regions that represent about 20 per cent of its economy – will weaken an already spluttering Chinese economy and its demand for oil.
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