The chief argument for tightening the coalition countries’ existing oil-price cap is that other ideas for reducing Russia’s oil-price rents seem unfeasible. Only two have been put forward so far: engineering a decline in global oil prices; and imposing an effective global embargo on Russian oil, oil products and uranium through secondary sanctions on the countries that buy them. US president Donald Trump has pledged to do both.
The current market situation and OPEC’s new policy of increasing oil supply should indeed drive the price down. History suggests oil-price fluctuations can have political impacts: the decline in oil prices in the late 1980s was among the main factors that weakened the Soviet Union, for which oil rents were similarly important as for modern Russia.
However, changes in the structure of oil markets in recent decades, driven by the US-led expansion in shale oil production, would limit the effectiveness of such a plan. Shale oil now accounts for about 10 per cent of global production, but it is costlier to produce than Russia’s conventionally extracted oil, and a large part of shale production becomes uneconomic if prices fall below $60 per barrel. If the price fell below this value, its producers would close wells and cut production, and declining availability would keep the price from falling further. Besides, the US would likely intervene to uphold the price if it fell too far, especially given the strength of relations between US shale oil producers and the Trump administration. Although the Russian economy already faces problems due to low oil prices, it can weather a decline for at least a year or two more at the current rate.
A group of US lawmakers led by senators Lindsey Graham and Richard Blumenthal proposed a full embargo on Russian exports of oil, oil products and uranium by sanctioning third countries that continue purchasing these products with a 500 per cent tariff on their exports to the US. President Trump later threatened similar measures, albeit with a tariff rate of 100 per cent.
Though promising in theory, this approach will have limited effect for one main reason: the role of China. China accounted for 47 per cent of Moscow’s crude sales in June 2025. As the world’s largest importer of crude oil, China could easily absorb all of Russia’s exports and, amid growing political ties, can be expected to continue purchasing Russian oil for the foreseeable future. Meanwhile, China’s near-monopoly on certain critical minerals gives it strong leverage over the US, as shown by the recent negotiations between the two countries.
China accounted for 47 per cent of Moscow’s crude sales in June 2025 and, amid growing political ties, can be expected to continue purchasing Russian oil for the foreseeable future.
China has no appetite to bow to US economic pressure: beyond the obvious economic interest, doing so would be regarded as a political humiliation, even before China’s perceived interest in preserving the Putin regime is considered. Besides, the US is wary of possible disruptions to the oil market that such measures could incur.
An improved version of the current oil-price cap is more likely to succeed. The cap would need to be properly enforced, ‘sealed’ and gradually lowered to build the economic pressure on the Putin regime. The lower the price, the more oil Russia would need to sell to support its balance of payments, and thus the risk of such a sanction creating supply shortages in global markets is low. If Russia followed through on its threat not to supply oil at prices below the cap, it would be a sort of self-imposed embargo, similar in its consequences to the Graham–Blumenthal proposal. But, in this scenario, Russia would lose more than a third of its export revenues. This would necessitate a corresponding reduction in imports, as Russia depends on foreign currency to pay for them, and other financial avenues for acquiring foreign currency are already closed by sanctions. The Russian authorities might have to ration imports to prioritize military needs. This would be economically disruptive for Russia, especially because the decades-long dominance of mining has caused other sectors to decline and Russia’s economy now relies heavily on imports, including in critical sectors such as agriculture.
Unlike an embargo, a well-enforced oil price cap would become self-sustaining. An embargo forces buyers to choose between paying market prices for non-embargoed supplies or violating the embargo to buy oil at a discount. In other words, there is a built-in incentive for importing countries to breach the conditions of the embargo. In contrast, a price cap benefits buyers because it affects price, not supply. Any discounts offered by a seller would likely remain smaller than the gap between the market price and the cap. Put another way, discounted supplies would still be costlier than those under the cap. If the cap is then progressively lowered, the seller’s incentive to circumvent it increases – but so does the motivation for buyers to uphold the cap and secure the savings it provides.
A potential concern is that countries purchasing Russian oil outside the embargo – such as China, India and Türkiye – are the main beneficiaries of the price cap, as a lack of competition among buyers allows them to acquire larger volumes of oil at a cheaper price. However, this situation is a reflection of how the coalition’s embargo functions in practice. The original idea behind the price cap, first proposed in early April 2022, was to serve as a substitute for a full embargo, which had not yet been agreed and whose prospects were uncertain due to the severe impact it would have had on EU economies. Under that original idea, the benefits would have been more evenly shared. To help address this unfairness, we propose that ‘white-listed’ buyers contribute half of their discount to a fund supporting Ukraine (see below).
Enforcement is key because otherwise a seller can boycott proposed transactions at the capped price, instead selling its oil at a slight discount to market prices but still above the cap. In that event, buyers must choose between accepting a seller’s higher prices or insisting on the lower, capped price. If they choose the latter, the risk is that Russia refuses to sell at the capped price (in the knowledge that other buyers are willing to violate the cap) and that importing countries then have to buy at a market price from another supplier. This explains why Russian oil trades at a discount wider than the normal Brent–Urals spread, but still often above the current $60 per barrel cap.
Collective action on the part of buyers or stronger enforcement is needed to make the cap work. While individual buyers lack the market or political power to enforce a cap, and their collective action seems unfeasible as of now, a seller’s ability to boycott capped transactions diminishes once third-party enforcement reaches a critical threshold: if a large enough share of the exported commodity is being sold below the cap, buyers are in a strong position to insist on paying no more than the capped price. Thus, if means of enforcement are robust from the outset, further price reductions and wider compliance should become self-sustaining.
China might still choose to prioritize its geopolitical interests over economic ones and continue purchasing Russian oil at prices above the cap. But this would only apply to the share of Russian exports that evade price cap enforcement – i.e. up to 40 per cent of export volumes, as around 60 per cent are subject to strict enforcement due to the need to transit through the Baltic Sea straits (see below).
Such a decision would effectively require China to subsidize the Russian economy at its own expense. However, China has so far demonstrated a pragmatic approach to its cooperation with Russia – illustrated, for example, by natural gas deals that are barely profitable for Russia due to the extremely low prices paid by China. While China does continue to assist Russia in circumventing sanctions, it does so primarily when such actions serve China’s own interests.
The necessary enforcement threshold has not yet been achieved. When the market price exceeds the cap, only about 10 per cent of Russian seaborne crude oil exports are shipped in tankers owned or insured by firms based in EU or G7 countries. This share is too low to make the existing cap effective. It remains too easy for Russia to avoid sanctions by falsifying shipping documentation, and by finding loopholes Russian exporters can exploit in their choice of maritime insurance and transportation. These workarounds significantly diminish the cap’s efficacy, as observed from mid-2023 until recently, when average Russian oil prices remained above the cap despite some discounting by Russian sellers.
