How does the price cap on Russian oil fit into the picture?The Group of Seven allies in December 2022 imposed a $60 per barrel price cap on Russian oil, hoping to limit Russia’s revenues from fossil fuels.The Treasury Department says Kremlin oil tax revenue was more than 40 percent lower in the first nine months of 2023 because of the cap. But the IMF says Russia’s economy is still set to grow, with GDP projected to increase by 2.6 percent in 2024.Policy experts are divided on the effectiveness of the price cap. Some have called for stronger enforcement of the current policy, a lowering of the price cap or even a complete oil embargo.MIT economists Simon Johnson and Catherine Wolfram wrote for the European Centre for Economic Policy Research Friday that the EU and U.S. should step up their enforcement of the cap.Treasury Deputy Secretary Wally Adeyemo says the U.S. and its allies will not lower the price cap — “rather what we’ll be doing is taking actions that will increase the cost” of Russia’s production of oil.Overall, how effective are the sanctions?The Biden administration acknowledges that sanctions alone cannot stop Russia’s invasion. And many policy experts say the sanctions are not strong enough — as evidenced by the growth of the Russian economy.Eswar Prasad, a Cornell economist, says the latest sanctions are “likely to be of limited potency in stifling Russia’s economy or its war effort.” He said the “escape valve” provided by China, Russia’s ability to maneuver around many of the sanctions and the impasse in Congress over new military aid for Ukraine “have substantially eroded the symbolic and substantive power of such sanctions.”The West still has other options to consider in further punishing Russia.The U.S. and Europe are considering the use of $300 billion of Russia’s frozen central bank assets to fund Ukraine as reparations for the war, but that’s a legally complex matter. The U.S. could also designate Russia a state sponsor of terrorism, an idea that has gained bipartisan popularity in the U.S. Congress.How is stalled U.S. aid in Congress impacting the war effort?With House Speaker Mike Johnson, R-La., blocking votes on Senate-passed aid for Ukraine and other countries, sanctions are stuck doing much of America’s heavy lifting in the war effort.Russia now has a decisive advantage in terms of munitions and troops. Putin’s forces have a 2:1 edge on manpower and a 5:1 edge on firepower, according to Dara Massicot, a senior fellow at the Carnegie Endowment for International Peace.This math is problematic for Ukraine’s ability to fight. It needs foreign aid to replenish its stockades and help even the odds. The new sanctions will at best limit the production of Russian factories going forward, rather than address the current gap in troops and weapons.
Source link
