Russia Is Making Heaps of Money From Oil, but There Is a Way to Stop That
It is an audacious and untested idea. It also appears to be the best available option. If it works, it could deprive Russia of revenue without devastating the economies of nations that are trying to support Ukraine.

Constructing a cartel is not easy. The United States has already secured the agreement in principle of the other members of the Group of 7, a coordinating body for the major democratic economic powers. American officials, including Treasury Secretary Janet Yellen, are working with their counterparts to hammer out the details. The buyers’ cartel would be strengthened if other big buyers of Russian oil, notably India and China, could be persuaded to participate. That seems unlikely. But U.S. officials argue the cartel could still increase pressure on Russia by allowing nations that are not participating to extract larger discounts, too.

Maintaining a cartel is also hard. Because the participants can benefit by cheating on the price ceiling, policing a price-fixing agreement is notoriously difficult. But in this case, there may be a plausible enforcement mechanism. A key piece of the new sanctions by the European Union and Britain is a ban on insuring tankers that carry Russian oil. Shippers need insurance to navigate canals and to enter harbors. European companies dominate the market; in April and May, 68 percent of Russian oil exports traveled on tankers insured by European businesses. That measure could be modified to ban insurance for tankers with oil purchased at a price above the cartel’s ceiling.

The Russian government has sought to forestall the plan by warning that it would refuse to go along with it. “As far as I understand, we won’t be supplying oil to those countries which would impose such a cap, and our oil, oil products will be redirected to the countries which are ready to cooperate with us,” Elvira Nabiullina, the governor of Russia’s central bank, said at a news conference last week. Analysts, however, say that if a cartel is established, Russia’s real choice would be between accepting its terms and leaving a large share of current oil production in the ground.