ARI SHAPIRO, HOST:
Here's another way the U.S. and allies are pressuring Russia to end its war in Ukraine - through a plan to deprive the Kremlin of much-needed cash. Critics say the plan could have loopholes, and there's no guarantee it will work with Russia having funded its war for many months through the high cost of oil. NPR's Jackie Northam reports.
JACKIE NORTHAM, BYLINE: There are two key policies that will be unveiled on December 5 targeting Russia's oil revenue. First, the European Union will ban all seaborne imports of Russian crude. A major shift, says Ben Cahill with the Center for Strategic and International Studies.
BEN CAHILL: What policymakers are trying to do is cut the world's largest oil exporter out of the market to a large degree. They're trying to cut Russia off from Europe, which has always been one of its largest export destinations.
NORTHAM: The second blow is that the U.S. and G-7 allies will impose a price cap on the oil Russia continues to sell to other parts of the world. The price cap plan, which has been spearheaded by the U.S. Treasury Department, is meant to limit Russia's oil profits but keep some crude flowing on the world's most market. That's because there's been concern that new EU bans on oil - as well as insurance, also taking effect next week - would send oil prices skyrocketing by creating huge cuts in supply, says Arkady Gevorkyan, a commodity strategist at Citi Research.
ARKADY GEVORKYAN: We actually estimated, and to be around 1.25 million barrels per day is a potential risk for Russian oil to be out of the market because of that.
NORTHAM: With global oil consumption hovering in the range of 90 million barrels a day, that's enough to raise prices for gas and heating fuel. The price cap plan will now allow tankers to carry Russian crude if the price paid for it is at or below the level set by the G-7 and other nations. That price is meant to be low enough to limit the Kremlin's profits, high enough to keep Russia producing. But there could be blowback. President Vladimir Putin has declared he will not sell to any country taking part in the price cap. Cahill says Russia has already been looking for customers beyond Europe.
CAHILL: And that's really meant sending much larger volumes to India and to China, to Turkey and a handful of other countries in Asia. But they've had to accept lower prices as a result.
NORTHAM: Enforcing the price cap will be a challenge. The plan depends heavily on documentation and proof about where the oil on the tanker is from and how much it costs. Michelle Wiese Bockmann, an analyst with London-based Lloyd's List, a maritime news agency, says there's already a lot of illicit oil trade. Everything from ship to ship transfers in the middle of the night to falsifying documents.
MICHELLE WIESE BOCKMANN: It's very likely that sanctions evasion is going to be a hallmark of what happens post-December 5. There's a willing number of vessel owners who are prepared to take the risk and make money.
NORTHAM: The price cap can only go ahead if the European Union agrees by Monday on what the cap will be. So far, the 27-member EU has not been able to agree on what that price will be. Jackie Northam, NPR News, Washington. Transcript provided by NPR, Copyright NPR.