The West's campaign to fight the Kremlin and force President Vladimir Putin to abandon the war in Ukraine is entering a delicate phase, writes Bloomberg..

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From February 5, the European Union will join the UK and the US in banning seaborne imports of Russian diesel fuel and other petroleum products.. This measure, combined with a price cap on Russian fuel exports, is intended to create a significant hole in Moscow's energy revenues.. The flip side: If European buyers can't find alternative fuel supplies, sanctions risk driving new spending on diesel-dependent industries like agriculture and trucking, and making it harder for governments to contain inflation..

Isn't Russian oil already under European sanctions

Yes, but they apply to unrefined crude oil, which is subject to European bans and a $60 per barrel price cap imposed on companies that continue to buy oil from Russia. New sanctions will affect sea deliveries of Russian refined fuel. The country is also a major exporter of naphtha, which can be used to make gasoline and plastics, and fuel oil, which is often used for power generation and shipping.. It also supplies jet fuel, vacuum gas oil and other petroleum products.. Overall, Russia accounted for 9.3% of global oil product cargo in 2022, about 0.5 percentage points more than its share of the crude oil market, so recent EU sanctions are no less significant.

How will the price cap work

Just like the cap on oil prices imposed by countries including the G7 and the EU. Anyone who pays more than the established limit for products shipped from Russia will not be able to receive insurance and funding from key participating countries. This is a big problem considering that over 95% of the world's ocean tankers are insured through London.. The idea is that even if buyers in Africa and other countries are willing to buy Russian diesel fuel at a price higher than the established one, most of the world's tankers will not be able to transport it.. Oil product prices fluctuate and the G7 intend to set two price caps, with levels yet to be determined. However, it is possible that part of the Russian fuel will be supplied at non-fixed prices through a "

How buyers from the EU will replace Russian fuel?

One of the most difficult tasks for them will be replacing diesel fuel, which is used to power cars and trucks, agricultural machinery, ships, manufacturing and construction equipment.. In 2022, about 220 million barrels were delivered to the block from Russian ports - enough to fill about 14,000 Olympic-sized swimming pools. Suppliers in the Middle East, where construction of new refineries is ramping up, are an obvious alternative. India and the US can also help fill this gap..

Will it be enough?

This depends in part on whether firms in China take advantage of increased export quotas to ship more oil products to the global market.. This should free up additional barrels for EU supplies.. The increase in the quota does not necessarily mean that all possible exports will be carried out, especially since the Chinese economy has reopened after Beijing abandoned its strict "

There is also the question of whether Russia will continue to export diesel fuel.. If so, then world trade flows will, in fact, be shuffled. The same amount of Russian fuel will circulate in the world, only it will be delivered to other places. However, if Russia fails to find enough buyers and is eventually forced to cut production, this could lead to a decrease in the availability of fuel in the world.. Strikes in the French oil sector further complicate the picture as disruptions to refineries are possible, which could lead to a reduction in production in the EU..

What is the ideal result for the EU?

EU leaders hope new sanctions will cut Russia's financial spending without triggering an energy supply shock that disrupts key industries and makes it harder for governments to control inflation.

If the price cap is too low, Russian companies may refuse to sell or put more effort into finding ways around it.. If it is too high, then they will simply experience the inconvenience associated with the need to find new buyers.. Potential new buyers of Russian fuel may be Turkey, as well as the countries of Africa and Latin America.

Could there be unintended consequences?

Some countries could benefit if they buy Russian diesel fuel at limited prices to meet their domestic needs and sell fuel from their own refineries to EU buyers at a much higher price..

In addition, there is little stopping buyers outside the EU, such as India, from purchasing Russian oil, processing it at their own refineries to produce fuel, and then legally selling those barrels to buyers in the EU.. Traders who want to completely break the rules can ship Russian fuel to one country, mix it with another fuel (or simply relabel it) and send it to the EU. It can be very difficult to prove the true origin of such cargoes..

So, the G7 countries intend to develop two price ceilings for Russian oil products to take into account those that are sold at higher prices than crude oil (for example, diesel), as well as those that are sold at a discount (fuel oil).

As part of efforts to impose sanctions on Russia for its invasion of Ukraine, the European Union intends to ban the import of Russian oil products on February 5 and impose cap prices on exports to third countries, which, in particular, will affect diesel fuel, naphtha, other light oil products and fuel oil.