Four months into the invasion of Ukraine, the Russian army continues to grind its way relentlessly through the Donbas region. Some Western commentators are calling for more weapons to be supplied faster to Ukrainian forces. According to Avril Haines, the US Director of National Intelligence, there is no prospect for the military conflict to end soon. It makes sense, therefore, to target the economics of Putin\u2019s regime and his ability to wage a prolonged war \u2013 or a repeated series of wars against Ukraine and potentially others. And here, Putin has a major strategic vulnerability: Russia\u2019s overdependence on fossil-fuel exports, which generate almost all of its foreign-currency inflows \u2013 nearly \u20ac100bn ($104bn) in the first 100 days of the war.
\nConsider how the world would react if Russia were to use nuclear weapons against civilian populations anywhere. The horror of that atrocity would immediately result in every country with a conscience refusing to buy oil (or anything else) from Russia. Putin\u2019s revenue would collapse, the rouble would depreciate rapidly, and inflation likely would rampage across Russia. It is very unlikely the Russian regime would be able to continue fighting on that basis. Without exports, a country has no hard currency \u2013 and no way to buy supplies of any kind from abroad.
\nWhy, then, is the world unwilling to take such measures immediately under current conditions, when Putin\u2019s forces are targeting and killing unarmed civilians on a massive scale? The list of atrocities is already long and appalling: the dead and tortured in Bucha, the bridge at Irpin, the railway station in Kramatorsk, the maternity hospital and theatre (clearly marked as sheltering children) in Mariupol, and most recently the missile attack on a shopping mall in Kremenchuk?
\nFor some countries at least, enough Ukrainian children have already died. And Putin\u2019s aggression must come to an end eventually. So, why not stop buying Russian oil now?
\nThe main reason is that limiting the quantity of Russian oil exports could backfire. The pressing task is to reduce Russian oil revenues, but such a measure, it is feared, could push up the world price of oil (which is priced in dollars) and boost Putin\u2019s dollar earnings, even if Russia\u2019s export volume falls.
\nTo their credit, G7 leaders took on this issue directly by endorsing, at least in general terms, a potential cap on the price that Russia receives. Russian oil exports can continue but at a lower price than they would otherwise. In effect, the G7 is proposing to create what some are calling an Inverse-Opec \u2013 a coalition that would directly target and squeeze Putin\u2019s oil revenue. Some experts argue that oil prices will increase anyway or that the cap will lead to unintended side effects.
\nThe price cap is a new idea, and any such policy innovation requires working out many details. There is also an international coalition to be built. But what is being asked of countries like India and China is quite reasonable: Demand a bigger discount on the oil they are already receiving from Russia. If a price cap doesn\u2019t work, there are two options. The first is to give up and let Putin win. The second option is what smart policymakers always do when the system is on the line \u2013 try again, adjust the approach, and bring more pressure. If you don\u2019t like the G7\u2019s plan for a price cap, now is a good time to put forward your own recommendations.<\/p>\n","protected":false},"excerpt":{"rendered":"
Four months into the invasion of Ukraine, the Russian army continues to grind its way relentlessly through the Donbas region. Some Western commentators are calling for more weapons to be supplied faster to Ukrainian forces. According to Avril Haines, the US Director of National Intelligence, there is no prospect for the military conflict to end […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[1863,6269],"class_list":{"0":"post-271231","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-editorial","7":"tag-revenue","8":"tag-russian-oil"},"yoast_head":"\n