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Chapter 98: The Price Cap Fiction: A Policy Designed to Fail

The G7's oil price cap was presented to the world as the centerpiece of the economic war against Russia, a sophisticated, almost elegant financial weapon designed to achieve two seemingly contradictory goals simultaneously. It was sold as a masterstroke of policy, a way to "have our cake and eat it too." The policy promised to keep Russian oil flowing onto the global market to prevent a catastrophic price spike for Western consumers, while simultaneously slashing the Kremlin's revenue by dictating that its oil could only be sold at or below a fixed price of $60 per barrel. It was hailed as a brilliant, modern solution that would bankrupt Putin without harming the West. In reality, it was a piece of performative statecraft, a complex and ultimately toothless charade designed not to cripple Russia, but to manage political risk and protect Western economies.

The policy’s entire premise was built upon a single, flawed assumption: that the West’s dominance over the "soft infrastructure" of maritime trade was absolute and unchallengeable. The enforcement mechanism for the price cap did not rely on naval blockades or military force; it relied entirely on the West's control over key services that every oil tanker in the world requires. This primarily meant insurance. The vast majority of the world's tanker fleet is insured by the International Group of P&I Clubs in London, a syndicate that the West believed it controlled absolutely. The policy mandated that these insurers, as well as Western finance and brokerage firms, could only provide their services to ships carrying Russian oil if the cargo’s owner provided a sworn "attestation"—a simple piece of paper—confirming the oil had been purchased at or below the $60 cap. The theory was simple: without Western insurance, no major port would allow a tanker to dock, effectively taking it off the board.

This entire enforcement mechanism, however, had been rendered partially obsolete before it was even launched. Russia's pre-emptive creation of the "ghost fleet," the shadow armada of self-owned, self-insured tankers, provided a massive override to the G7's system. For the hundreds of ships in this fleet, the price cap was completely irrelevant. They did not need Western insurance, Western finance, or Western approval to operate. They loaded their oil in Russia, transported it on their own vessels with Russian-backed insurance, and sold it to willing buyers in India, China, and elsewhere at whatever the free market price was, which was often ten, twenty, or even thirty dollars above the so-called cap. The policy was designed to police a game, but Russia had simply chosen to leave the stadium and play on its own field.

For the portion of the oil trade that was still carried by tankers that did rely on Western insurance, the price cap devolved into a farce of institutionalized fraud. The "attestation" system, which relied on the honor of the participants, was immediately and systemically abused. It became standard practice in the shipping industry to operate with two sets of books. A fraudulent invoice, showing a compliant price of $59.99 per barrel, would be created and presented to the Western insurer in London to secure the necessary paperwork. At the same time, the real invoice, reflecting the actual, much higher market price, would be settled quietly between the Russian seller and the final buyer through a non-Western bank in Dubai or Hong Kong. It was a simple, elegant, and widespread deception that made a mockery of the entire policy.

The data, in the end, is undeniable. Independent, data-driven analysis from energy market specialists like Argus Media and research organizations like the Centre for Research on Energy and Clean Air (CREA) provided irrefutable proof of the policy’s failure. Month after month, their tracking of port sales, shipping data, and customs records showed that the vast majority of Russia's seaborne crude, from its flagship Urals blend in the West to the ESPO grade in the East, was consistently selling for well above the $60 cap. The policy was a public relations success, allowing Western politicians to claim they were taking tough action, but it was a spectacular economic failure. The truth is that the $60 price point was never designed to bankrupt Russia; it was a "Goldilocks" number, carefully chosen to be high enough to incentivize Moscow to continue producing and exporting, thereby preventing the one thing Western leaders truly feared: a spike in gasoline prices before their next election. The price cap was not a weapon; it was a placebo.

The Discourse 98: The Illusion of Enforcement

If the ghost fleet and the shadow insurance market were the primary tools Russia used to render the oil price cap irrelevant for its own vertically integrated trade, the policy's failure was compounded by a second, equally corrosive force: the deliberate and systemic fraud practiced within the supposedly "compliant" tier of the market itself. For the tankers that still relied on Western services, particularly Greek-owned vessels, the price cap was not a barrier to trade; it was merely a paperwork problem to be solved. This led to the creation and widespread adoption of a fraudulent "attestation" system, an elegant, plausibly deniable, and deeply cynical mechanism that allowed all parties to maintain a veneer of legal compliance while continuing to trade Russian oil at full market prices.

The core of this fraud lay in the policy's surprisingly naive enforcement mechanism. The G7, in designing the cap, chose not to implement a complex system of cargo tracking or price verification. Instead, they relied entirely on an honor system, a simple legal document called an "attestation." To get the Western insurance and financing necessary to transport Russian oil, a shipping company simply had to provide a sworn statement, a signed piece of paper, declaring that the cargo had been purchased at a price at or below the $60 cap. This created a massive incentive for dishonesty and transformed the attestation from a legal document into a commodity to be bought and sold.

The market immediately responded by creating a system of dual invoices. A typical transaction would involve at least three parties: the Russian oil seller, a willing intermediary (often a newly formed and anonymous trading house in Dubai), and the final buyer in a country like India. Two sets of books would be created for the same cargo. A fraudulent, fake invoice would be produced showing a compliant sale price—for instance, $59.95 per barrel. This was the "attestation invoice," the official document that would be shown to the shipping company, who would in turn present it to their insurer in London and their financier in Geneva. With this clean piece of paper, the Western services would be granted, and the cargo would be deemed "cap compliant."

Simultaneously, the real transaction would be settled based on a second, secret invoice reflecting the true, much higher market price—say, $75 per barrel. This payment would be routed through the new financial netherworld, moving from the buyer in India to the intermediary in Dubai and finally to the seller in Russia, all through non-dollar currencies and non-Western banks. In this system, every participant was protected. The shipping company and the insurer had their pristine, legally compliant attestation, giving them a shield of plausible deniability. The buyer and seller got to transact at the real market price. The only party being deceived was the G7 itself, the architect of a system that was, in effect, designed to be defrauded.

The data gathered by independent energy market analysts confirms the breathtaking scale of this fraudulent trade. By tracking the port costs, the shipping and insurance rates, and the final sale prices in India, researchers were consistently able to prove that even on the vast majority of "compliant" voyages, the all-in cost was well above what would be possible if the oil had truly been purchased at $60. The price cap was thus reduced to an illusion of enforcement. It was a policy whose primary function was not to damage the Russian economy, but to provide a paper-thin veneer of legality for a global trade that was intent on continuing, business as usual. It was not a weapon of economic war, but an elaborate exercise in collective, institutionalized hypocrisy.

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