The story of the price cap highlights a dilemma for the US and its partners.
Recognising that Russia is one of the largest players on the global energy market, they have tried to keep Russian oil flowing to avoid hiking energy prices. The result of that is that Moscow is still making money.
“In a way, we refused to properly sanction Russian oil,” Elina Ribakova concludes. “This price cap is an attempt to have our cake and eat it. The priorities are to allow Russian oil on to the market and to reduce Russia’s revenue. And when these two priorities conflict, unfortunately the first one wins. That allows Russia to raise a lot of revenues and continue with the war.”
Russia has become China’s biggest supplier of oil. But Beijing’s importance for Moscow extends far beyond energy exports. China has become a lifeline for the Russian economy. Trade between the two countries hit a record $240bn (£188bn) last year.
Walk around St Petersburg or Moscow and you don’t need to be an expert in economics to understand how important China has become to a sanctions-hit Russia. Electronics shops here are full of Chinese tablets, gadgets and mobile phones. Chinese car dealers now dominate the local car market.
Not that the Russian automobile industry is sitting twiddling its thumbs. At a business expo recently in Nizhny Novgorod, Russia’s Prime Minister Mikhail Mishustin was shown the brand new version of a classic Russian brand, the Volga. There was just one thing – the new Volga is based on a Chinese car, the Changan.
“Where was this steering wheel made? Is it Chinese?” enquired the prime minister, apparently irritated by the lack of Russian components.
“We want [the wheel] to be Russian,” he said.
Ultimately, however, it is not the automobile industry that is driving Russia’s economic growth.
Military spending is doing that.
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