A Price Cap on Russian Oil Would Be a Dangerous Escalation
A price cap on Russian oil makes economic sense, but far more than economics is at stake here.
Russia can pump the oil from the ground, but where to send it?
Photographer: Andrey Rudakov/Bloomberg
A price cap on Russian oil, set by the US and its allies, is likely to come to pass in the next few weeks. One question is how such a cap might operate. Another is whether it is a good idea. The complicated and uncertain answer to the first question is a reason to be uneasy about the second.
A price cap makes economic sense. But far more than economics is at stake here. Russia sells oil at a significant profit, and the price cap limits some of that profit. Russia gets about 30% of its entire federal budget from oil and gas revenues, so taking that away will hurt President Vladimir Putin’s war against Ukraine.