Biden & G-7 Push World Into "Nightmare Scenario"
The West's Malthusian neoliberal political order is rapidly collapsing
Led by U.S. President Joe Biden, the Group of Seven (G-7) economic powers today announced plans to ban the transport of Russian oil sold above a certain price with the goal of hurting Russia enough so that it ends its war against Ukraine. "There is only one way out: for Putin to accept that his plans in Ukraine will not succeed," said German Chancellor Olaf Scholz. The G-7’s plan is to impose a price cap on Russian oil through the regulation of petroleum shipping, banking, and insurance.
The proposal is, in a word, ludicrous. Russian President Vladimir Putin would never agree to a price cap. He would likely withhold oil from the market in the same way he has been withholding natural gas from Europe, driving up prices. Putin would then sell oil to countries including China and India at a 30-40% discount, as he has been doing, or larger. Russia produces oil at a price of just $3-$4 per barrel and Russian firms can profit with oil prices at $25-$30 per barrel. And while it’s true that there is a near-monopoly in shipping insurance, Russia has been creating alternatives to it.
Neither China nor India are likely to agree to the cap unless G-7 nations imposed severe “secondary sanctions” against them, which could escalate into a mutually destructive trade war. But even if they did formally comply, the two nations could easily cheat, as several analysts quickly noted on Twitter. “A price cap will never work,” said one. “Every refiner will bid price cap…. India and China… will cheat and pay above the cap and win all they want as [the] other option is twice the price. Nobody will know they paid it, either. Russia ends with more revenue.”
Defenders of the oil price cap proposal point to a similar oil price cap mechanism that President Bill Clinton led the United Nations Security Council to impose on Iraq in 1995, as part of the U.N.’s “oil-for-food programme,” which allowed Iraq to sell its oil in exchange for food and medicine. It was meant to serve the humanitarian needs of the Iraqi people while preventing Iraq’s then-president, Saddam Hussein, from increasing military capabilities. Oil buyers put money into an escrow account run by a private bank. Some of the money was then distributed to Iraq, some was for war reparations to Kuwait, and some was for U.N. operations.
But the Iraq oil-for-food scheme became famously corrupt and had to be shut down. And while the U.N. Security Council was united on Iraq, it is today divided over Russia's invasion of Ukraine. China, India and 33 other nations refuse to condemn Russia’s invasion, and China and India are, as noted, the largest buyers of heavily-discounted Russian oil.
https://michaelshellenberger.substack.com/p/biden-and-g-7-push-world-into-nightmare