Russian oil, subject to sanctions, is skyrocketing
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Russian crude oil prices — or Urals, the main Russian export grade — have skyrocketed over the past week.
Why it matters: This oil, subject to sanctions from the G7, has long been priced lower than the global benchmark Brent crude.
- It trades higher now. On Monday, Urals closed at $100.67 a barrel, while Brent was priced at $99, according to data from Trading Economics.
- The gap widened to $12 a barrel at one point on Tuesday, Nicholas Mulder, an economist at Cornell University who studies sanctions, tells Axios.
Between the lines: There appears to be a rejiggering of the economic sanctions landscape since the Iran war, he says.
- The U.S. and its allies are less able to maintain tight sanctions on Russian oil while dealing with the ongoing impacts from the war.
- There's a trade-off between opposing economic moves: Iran is leveraging its own economic weapon by effectively shutting down traffic across the Strait of Hormuz.
- "In order to defend themselves against Iran's economic weapon, the U.S. is now loosening its own economic weapon on Russia," Mulder says.
What they're saying: "Russia's the obvious country that wins because they end up with higher energy prices and more leverage on countries that need their oil and gas," says Ian Bremmer, president of the Eurasia Group.
- Russia benefits because American military capability is moved to the Middle East. But it's a winner at the margins, he says, noting Russia is embroiled in its own war. "There are a lot more losers than winners in this," he adds.
- The secondary winner is China in the long term, Bremmer says. The country has been moving away from oil really quickly. "That's a very attractive space to be in, if you see a major war happening in the Gulf."
The other side: America and its allies will be the real winners once "the objectives of Operation Epic Fury are achieved, our country is safe from threats posed by the rogue Iranian regime, and the free flow of oil in the Strait of Hormuz is no longer disrupted by terrorists," White House spokeswoman Taylor Rogers tells Axios.
- "The president and his energy team are closely watching the markets and speaking with industry leaders. The U.S. military is drawing up additional options following the president's directive to continue keeping the Strait of Hormuz open," press secretary Karoline Leavitt told reporters Tuesday.
The bottom line: "So far, there is only one winner in this war: Russia," António Costa, president of the European Council, said in a speech to European Union ambassadors in Brussels on Tuesday.
- "It gains new resources to finance its war against Ukraine as energy prices rise, " Costa said. "It profits from the diversion of military capabilities that could otherwise have been sent to support Ukraine. And it benefits from reduced attention to the Ukrainian front as the conflict in the Middle East takes center stage."
