Stay Updated on the War in Ukraine: Sign up to receive free daily updates from myFT, summarizing the latest news on the conflict each morning. According to an analysis by the Financial Times, inflated shipping costs have allowed Russian companies to earn more from selling crude oil to India than previously thought. These charges, which were introduced after Russia’s invasion of Ukraine, may have generated over $1 billion in just three months. While Russian oil producers have been selling crude to India below the $60-per-barrel price cap, the inclusion of freight costs has resulted in much higher prices. Research from the Kyiv School of Economics shows that these inflated shipping costs create a major loophole in the price cap regime, allowing someone, somewhere, to siphon off billions of dollars. The UK’s foreign secretary, James Cleverly, has commented that Putin’s desperate attempts to mitigate the price cap’s impact are not surprising and that the UK will continue to enforce this measure alongside its partners. The G7’s price cap is designed to keep Russian oil flowing while pressuring its revenues to undermine funding for the war. However, the cap does not limit freight costs, and analysis shows that sellers of Russian oil may have captured excess charges. During the period from May to July, Russia shipped 108 million barrels to India, potentially earning an additional $800 million through overcharging. Furthermore, the freight costs estimated by Argus suggest that the Russia-connected fleet may have made over $350 million in revenue on this route. The FT has identified vessels secretly owned by Russian entities that have significantly diverted to Russian oil routes since being bought. By understating prices in Baltic ports, Russia has been able to use ships with western insurance. However, the rising international crude prices have made it more challenging for western-linked companies to comply with the cap, resulting in a decrease in the number of western vessels involved. Although higher prices may deter buyers, the discounts offered by Russia are still relatively low.
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