Russia is still shipping crude, but its oil revenues have plunged, fulfilling the twin goals of the energy price cap the U.S. government devised last year, Matt writes.

Why it matters: After it launched its war on Ukraine in 2022, Russia's position as a major oil supplier to global markets was seen as a constraint on the West's ability to punish Moscow.

• Now, the price cap may be helping to solve that problem.

The latest: There are fresh signs that Russia's finances are in trouble.

• Russian oil and gas revenues dove by 45% in the first quarter, as its deficit exploded due to the costs of the war.
• The average price for Russia's Urals grade crude oil was $47.85 a barrel in March, down from $89.05 last March.
• In a sign of the economic stress Russia faces, the ruble just suffered its worst week of the year, hitting its lowest level against the dollar since April 2022.

Background: Last year global oil prices were soaring — $5 gasoline! — amid widespread uncertainty about access to supplies.

• Effectively, Russia was benefiting from a surge in prices that its own illegal invasion had set off.

What they did: In December, the European Union — long Russia's largest buyer — imposed an embargo on Russian oil (the U.S. did so back in March 2022)

• Simultaneously, the G7 group of advanced economies, along with allies, agreed to a never-before-attempted plan to impose a price cap of $60 on Russian crude oil that the U.S. Treasury Department had spearheaded.

How it works: In practice, the plan is actually a series of rules and restrictions on companies like shipping giants and insurance providers — almost all based in the West — that are the backbone of the global oil market.

• Basically, shippers and insurers are required to get those buying and moving the oil to officially promise — in signed "attestations" — that the petroleum was sold below $60.
• Violations would open companies to potential criminal and civil penalties.

The big picture: Given the obvious potential loopholes in the plan — for instance, people simply lying about paying less than $60 for Russian oil — there was a fair amount of skepticism that this price cap plan would work.

• But the early evidence suggests that the cap, in conjunction with other sanctions, has been pretty successful at keeping Russian oil flowing — while reducing the amount of money Russia reaps from its sale (predominantly to China, India and Turkey).

The bottom line: There are always a number of factors at play in market prices, making it essentially impossible to prove something is "the reason" a price is moving one way or the other.

• But the red ink in Russia's budget suggests this policy is performing pretty well.

"Most people would say it's probably helped reduce revenues," says Robert McNally, president of consulting firm Rapidan Energy Group, who served as an energy adviser in the administration of President George W. Bush, of the oil price cap.

• "It does give some leverage to India and China when they're negotiating with Russia," he adds.

On the other hand: Kevin Book, who heads up energy research at consulting firm ClearView Energy Partners, emphasizes that it remains to be seen how well the cap would operate if energy demand from China — where the economy has struggled to recover from the COVID crisis — fully bounced back.

• "On the surface, it looks like both goals are being met," Book says. But "it's hard to see below the surface," he adds.

🇯🇵 Warren Buffett raised his stakes in Japanese trading houses. (CNBC)

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😓 Debt burdens of poorest countries at highest level since 1998. (FT)

Office space available for lease in the U.S. is at a record high, according to data from CoStar, Emily writes.

Why it matters: Remote work is already crushing the office market, and the data is a sign that the distress is going to get worse — vacancies, already at historic highs, will likely go higher.

Details: Looking at office availability is different from looking at office vacancy rates. Availability doesn't just look at empty offices. It includes occupied office space where the tenant notified the landlord they won't be renewing.

• And, crucially, availability takes into account leased office space where a tenant is trying to sublet the office.
• For example, a company that no longer needs all the floors it leased before COVID will try to sublet the space to someone else. That's happening a lot now.
• 13 tech companies in San Francisco have 3.5 million square feet of office space available for sublease, including Salesforce, Airbnb and Meta, according to data cited in the San Francisco Standard.

It's that last category — the amount of space available for sublease — that's jumped up in the wake of the pandemic.

• Over the last three years it's been "piling up and up and up," said Phil Mobley, national director of office analytics at CoStar.
• "There's a strong likelihood that much of that is going to convert into vacancy when the original lease term expires."

Cities reliant on the tech industry like Seattle and San Francisco are seeing the biggest increases in available office space.

• The office sector got hit with a one-two punch — remote work and the recent surge in layoffs in the industry means that employers just don't need that much space anymore.

San Francisco, like many cities nationwide, is already moving on an effort to transform some of those empty office buildings into apartments, Axios' Emily Harris reports.

• City legislators recently introduced new measures that would cut the cost and streamline the process for conversions.

Why it matters: The loss of commercial tenants is costing the city significant tax revenue. And supporters of office conversions also say it's time for a new downtown that's vibrant around the clock.

State of play: One of the measures would eliminate some fees that are typically imposed on residential development.

• The other would amend a number of planning code requirements for housing, such as specifics about exposure to natural light and bike parking.

Zoom out: One assessment of downtown buildings figured conversions could provide more than 11,000 new residential units.

Between the lines: Officials are also looking at broad downtown development incentives such as freezing property taxes and rolling back SF's real estate transfer tax.

• And proposed state legislation could clear the path for conversions "by right," which skips rezoning processes.
• "Frankly, I'm concerned whether San Francisco will go far enough or move fast enough," Assemblymember Matt Haney, who's sponsoring the state bill, told Axios.

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