Reuters: There's Only One Way To Stop Russian Federation's War With Ukraine

And it's already known.

Only the falling oil prices can stop Russian dictator Putin from continuing the war with Ukraine, writes Reuters news agency columnist Hugo Dixon. Although the Russian people are suffering during the war, it is not enough to make Putin change tack. It is most likely that he will reconsider if the West is able to cut Moscow's oil revenues.

Despite the fact that Ukraine's allies are turning away from Russian oil and Europe is finding alternatives to Russian gas, Moscow had a current account surplus of $51 billion in 2023. Although this is less than the previous year ($238 billion), Moscow is still in the plus. That could change if Ukraine's allies are able to reduce Russia's export earnings to such an extent that it starts experiencing a deficit, says Jacob Nell, a senior researcher at the Kyiv School of Economics.

He believes exports need to fall by about $80 billion before Putin has to take extreme measures to stabilise the economy. About $30 billion of that could come from a tightening of the gas embargo, as well as from restrictions on exports of fertilisers and metals such as nickel. But the bulk of it must come from lowering the price Moscow receives for oil to $50 a barrel.

That's easier said than done. The G7 and other allies set a ceiling price for Russian oil at $60 a barrel at the end of 2022, but Urals crude is still sold for about $71 a barrel, or about $14 below the price of Brent crude. Although the U.S. has tightened sanctions against tankers that violate the price cap, Russia can partially circumvent them by using its own fleet.

Ukraine's allies may be lucky if world oil prices fall sharply. Otherwise, they will need much tougher measures to bring down the price Russia receives for its oil to $60, let alone $50.

The key to achieving that goal will be to try to persuade India, the largest importer of Russian oil by sea, to stop paying more than the ceiling price, Nell says. The country could then benefit from cheaper oil and its refiners would increase their profits.

The problem is that Russia may refuse to sell oil at such low prices and instead cut production. This would drive up global oil prices, which would hit India as well as Ukraine's allies. Although cutting oil supplies would hurt Russia, Putin may take the risk if high oil prices increase the likelihood of Donald Trump winning the US presidential election in November.

Ukraine's allies are not yet willing to take the risk necessary to undermine Russia's gains. Until they do, Putin has no financial reason to end the conflict, the expert said.