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G7 coalition wages economic war on Russian oil

G7 coalition wages economic war on Russian oil

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By Newzino Staff | |

The Price Cap Experiment: Squeezing Kremlin Revenue While Keeping Global Markets Stable

February 12th, 2026: Ukraine Sanctions 91 Shadow Fleet Vessels

Overview

The G7 set Russian oil at $60 per barrel in December 2022—a novel attempt to starve the Kremlin of war funds without triggering a global energy crisis. Since late January 2026, the UK and EU have enforced a reduced cap of $44.10 using a new automatic mechanism that adjusts every 22 weeks to stay 15% below market prices; the United States has not joined this latest reduction.

Russia's response—a 'shadow fleet' of over 1,000 aging tankers—now moves 65% of its seaborne oil outside Western insurance and shipping networks. Moscow's oil and gas revenue fell 24% in 2025 to a five-year low, forcing tax hikes and reserve drains to fund the Ukraine war; Ukraine's February 12 sanctions on 91 shadow fleet vessels signal intensifying global pressure, but will Russia's workarounds persist?

Key Indicators

$44.10
New Price Cap
UK-EU cap effective January 31, 2026 (2+ weeks enforced)—down from $60 at inception and $47.60 under the 18th sanctions package
24%
Revenue Drop
Decline in Russia's oil and gas tax revenue in 2025, the lowest level since 2020
712
Sanctioned Tankers
Vessels designated by the US, UK, EU, Ukraine and allies through February 2026 (includes Ukraine's 91 new designations)
65%
Shadow Fleet Share
Portion of Russian seaborne oil transported outside Western services

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People Involved

Ursula von der Leyen
Ursula von der Leyen
President of the European Commission (Leading EU sanctions coordination)
Kaja Kallas
Kaja Kallas
EU High Representative for Foreign Affairs (Coordinating EU diplomatic and sanctions response)
Scott Bessent
Scott Bessent
US Secretary of the Treasury (Overseeing US sanctions enforcement)

Organizations Involved

G7
G7 Price Cap Coalition
International Sanctions Regime
Status: Active but internally divided on cap levels

The coalition restricts Western shipping and insurance services to Russian oil cargoes priced above designated caps.

Rosneft
Rosneft
Russian State Oil Corporation
Status: Under US SDN sanctions since October 2025

Russia's largest oil company, majority-owned by the Russian government, producing roughly 4 million barrels per day.

Lukoil
Lukoil
Russian Private Oil Corporation
Status: Under US SDN sanctions since October 2025

Russia's second-largest oil company and largest private firm, operating refineries across Europe and the Middle East.

Timeline

  1. Ukraine Sanctions 91 Shadow Fleet Vessels

    Enforcement

    President Zelenskyy enacts National Security Council decision imposing sanctions on 91 tankers used to transport Russian oil from ports like Novorossiysk and Ust-Luga, circumventing G7/EU caps. 27 vessels already sanctioned by US/UK/EU; Kyiv coordinates with partners for further action.

  2. UK-EU $44.10 Cap Takes Effect

    Implementation

    The reduced price cap becomes binding for UK and EU-regulated shipping and insurance services. The US maintains its $60 cap.

  3. EU Announces $44.10 Cap

    Policy

    First automatic adjustment under the dynamic mechanism reduces the cap from $47.60 to $44.10, reflecting the 22-week average of Urals prices minus 15%.

  4. US Navy Seizes Russian Tanker

    Enforcement

    US Coast Guard and Navy seize the Russian-flagged tanker Marinera in the North Atlantic, escalating physical interdiction of shadow fleet operations.

  5. Ukraine Strikes Shadow Fleet Tankers

    Military

    Ukrainian drones attack shadow fleet tankers Virat and Kairos off the Turkish Black Sea coast, marking direct military action against sanctions-evading vessels.

  6. Trump Sanctions Rosneft and Lukoil

    Enforcement

    After peace talks collapse, US designates Russia's two largest oil companies on the SDN list, blocking them from the American financial system.

  7. EU Adopts 18th Sanctions Package

    Policy

    EU reduces cap to $47.60 and creates dynamic mechanism to automatically adjust it every 22 weeks. Package also adds 105 shadow fleet vessels to sanctions list.

  8. EU Proposes Lowering Cap to $45

    Policy

    European Commission proposes reducing the price cap from $60 to $45 and introducing an automatic adjustment mechanism.

  9. Biden Sanctions 183 Shadow Fleet Tankers

    Enforcement

    In its final days, the Biden administration designates 183 tankers and sanctions major Russian producers Gazprom Neft and Surgutneftegas.

  10. Yellen Acknowledges Evasion Concerns

    Assessment

    Treasury Secretary Janet Yellen signals US is preparing to crack down on price cap evasion after Russian crude trades near $100 per barrel despite the cap.

  11. Petroleum Products Caps Implemented

    Implementation

    G7 coalition extends price caps to Russian refined products: $100 for premium products like diesel, $45 for discount products like fuel oil.

  12. $60 Cap Takes Effect

    Implementation

    The price cap becomes operational. Western shipping and insurance services are prohibited for Russian crude cargoes priced above $60 per barrel.

  13. G7 Agrees to Price Cap Concept

    Policy

    G7 leaders formally commit to implementing a price cap on Russian seaborne oil, a US-proposed mechanism to limit Kremlin revenue while keeping Russian oil on global markets.

Scenarios

1

Price Cap Bites: Russia Forced to Discount Further

Discussed by: Centre for Research on Energy and Clean Air, Re:Russia analytics, Carnegie Endowment

Aggressive enforcement—tanker seizures, secondary sanctions on buyers, insurance crackdowns—forces shadow fleet operations to become prohibitively risky. Russia must accept deeper discounts to move oil through remaining channels, driving Urals prices below $40 and creating severe budget stress. The 2026 budget deficit balloons past 4% of GDP, forcing spending cuts or accelerated reserve depletion.

2

Shadow Fleet Adapts: Evasion Outpaces Enforcement

Discussed by: Kpler maritime intelligence, Baltic Sentinel, Follow the Money investigative reporting

Russia continues expanding alternative shipping and insurance networks, particularly through Chinese and Indian intermediaries. Shadow fleet tankers reflag faster than they can be sanctioned. The price cap remains nominally in place but irrelevant—Russian oil trades at market prices through non-Western channels, and Kremlin revenue stabilizes near current levels despite the lower cap.

3

US Joins the Reduction: Coalition Reunites

Discussed by: Atlantic Council, Center for American Progress, congressional testimony

The Trump administration, facing pressure to demonstrate toughness on Russia amid stalled peace talks, aligns US policy with the UK-EU cap. The unified $44.10 ceiling, combined with aggressive secondary sanctions, creates genuine compliance pressure. India curtails Russian imports to avoid 500% tariffs, forcing a significant volume of Russian oil off the market.

4

Market Disruption: Cap Triggers Supply Shock

Discussed by: International Energy Agency, OPEC analysis, oil market traders

The tightening cap, combined with enforcement actions, actually reduces Russian supply to global markets. Without sufficient alternative sources, oil prices spike above $80, benefiting Russia's remaining exports while hurting Western consumers. Political backlash forces a pause or rollback of the cap mechanism.

Historical Context

1973 Arab Oil Embargo

October 1973 - March 1974

What Happened

After the US provided emergency aid to Israel during the Yom Kippur War, Arab oil producers led by Saudi Arabia imposed a total embargo on the US and key allies. OPEC raised prices from $3 to nearly $12 per barrel. US price controls worsened domestic shortages, creating gas lines and rationing.

Outcome

Short Term

The US economy contracted 2.5% and entered a severe recession. The embargo ended in March 1974 after US-brokered disengagement agreements, but prices remained elevated.

Long Term

The crisis permanently shifted global energy politics, spurring Western investment in non-OPEC oil, the creation of the Strategic Petroleum Reserve, and long-term efforts to reduce oil dependence.

Why It's Relevant Today

The 1973 embargo demonstrated how energy weapons cut both ways—producers gained leverage but also incentivized alternatives. The G7 price cap attempts the inverse: using consumer leverage to set prices while avoiding the supply disruptions that plagued 1970s-era embargoes.

Iran Oil Sanctions (2012-2016)

2012 - 2016

What Happened

The US and EU implemented comprehensive sanctions on Iranian oil exports to pressure Tehran over its nuclear program. Iran's oil exports fell from 2.5 million barrels per day to under 1 million. The country was largely cut off from the SWIFT financial messaging system and Western banking.

Outcome

Short Term

Iran's economy contracted sharply, with inflation exceeding 40%. Oil revenue dropped by an estimated $160 billion over four years.

Long Term

The sanctions brought Iran to the negotiating table, resulting in the 2015 nuclear deal (JCPOA). However, Iran also developed sanctions evasion techniques—ship-to-ship transfers, false documentation, front companies—that Russia later adopted.

Why It's Relevant Today

Iran sanctions proved that coordinated Western action can severely damage an oil-dependent economy, but also demonstrated the limits: Iran developed the 'shadow fleet' model that Russia now uses at far greater scale. Russia's 11% share of global oil production makes it harder to isolate than Iran's 4%.

Venezuela Oil Sanctions (2019-Present)

January 2019 - Present

What Happened

The Trump administration imposed comprehensive sanctions on Venezuela's state oil company PDVSA to pressure the Maduro government. Sanctions blocked US imports of Venezuelan crude and restricted access to the US financial system. Venezuela's oil exports plummeted from 1.5 million to under 500,000 barrels per day.

Outcome

Short Term

Venezuelan oil production collapsed amid the sanctions and years of underinvestment. The economy contracted by over 70% between 2013 and 2021.

Long Term

The Maduro government survived through Chinese and Russian support, currency controls, and sanctions evasion. In 2023, the Biden administration granted limited sanctions relief in exchange for electoral commitments Venezuela later abandoned.

Why It's Relevant Today

Venezuela demonstrated that maximum pressure sanctions can devastate an economy without achieving regime change. The G7's price cap approach on Russia explicitly tries to avoid this trap—maintaining oil flows while reducing revenue—but faces the same evasion networks Venezuela pioneered.

15 Sources:
+9
Baker McKenzie Global Sanctions Blog European Commission Meduza The Moscow Times Centre for Research on Energy and Clean Air Baltic Sentinel US Department of the Treasury European Commission Wikipedia NPR Carnegie Endowment for International Peace Office of the President of Ukraine Ukrainska Pravda Euronews US Department of the Treasury