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Will a New Price Cap on Russian Oil Work?
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Will a New Price Cap on Russian Oil Work?

Plus: The implications of Georgia’s Senate runoff on the 2024 presidential race.

Happy Wednesday! Wake up this morning with an extra spring in your step? Does the brisk December air seem fresher than ever? The 2022 midterm elections are finally over!

Quick Hits: Today’s Top Stories

  • Election decision desks projected Democratic Sen. Raphael Warnock will win reelection to the Senate after defeating Republican Herschel Walker in Georgia’s runoff election on Tuesday. Warnock led Walker 51.4 percent to 48.6 percent with more than 95 percent of the vote counted, and his victory will give Senate Democrats a 51-49 advantage in the chamber. Walker conceded the race in his Election Night remarks.
  • One day after Russia’s Defense Ministry announced it had shot down Ukrainian drones that had targeted two military airfields in Russia, another drone struck an airfield in Russia’s Kursk region, about 60 miles from the Ukrainian border. Ukraine did not claim responsibility for the strike. 
  • Five Iranian protesters accused of killing a plainclothes militiaman have been sentenced to death, Iranian officials said Tuesday. The sentences, which can be appealed, are the latest batch to be handed down during the ongoing protests over the death in police custody of 22-year-old Mahsa Amini. Thousands of protesters have been arrested and—according to Amnesty International—at least 28 are facing charges that risk sentences of execution. Hundreds have also been killed in clashes between security forces and protesters.
  • A Taiwanese chip manufacturing giant announced Tuesday it would double down on an investment in new semiconductor manufacturing facilities in Arizona, adding plans for a second fabrication plant in addition to a Phoenix one slated to open in 2024. President Joe Biden touted the announcement as evidence that the CHIPS and Science Act—the chipmaker subsidies law passed this summer—is working to bolster U.S. tech manufacturing, but many experts warn U.S. access to critical chips remains overly dependent on Taiwan.
  • Arizona Rep. Andy Biggs announced Tuesday he would run for speaker of the House, making him the first Republican to formally challenge Minority Leader Kevin McCarthy for the seat. The Republican conference voted 188-31 to nominate McCarthy over Biggs—the former chair of the House Freedom Caucus—in November, but even a handful of Republican defections to Biggs in next month’s vote of the full House could block McCarthy from securing the 218 votes he needs to secure the gavel.
  • Outgoing Nebraska Gov. Pete Ricketts announced Tuesday he’ll seek the Senate seat currently held by Sen. Ben Sasse, who is stepping down next month to become president of the University of Florida. Ricketts is widely expected to get the seat, a decision that rests with incoming Gov. Jim Pillen, whom Ricketts endorsed during this year’s Republican primary. Sasse wouldn’t have been up for reelection until 2026, but a special election will take place in 2024 to fill the last two years of the term.
  • The January 6 select committee, which is winding down its investigation as Republicans prepare to take control of the House, will recommend criminal charges to the Justice Department, committee chair Bennie Thompson told reporters Tuesday, although he said that “we have not made a decision as to who” they will recommend be charged. It would ultimately be up to the Justice Department to decide whether to act on the committee’s recommendations, which are not binding.
  • The Trump Organization was found guilty in a Manhattan court Tuesday of multiple charges of falsifying records and tax fraud. The decision comes a year after former CFO Allen Weisselberg pleaded guilty to 15 tax-related offenses and could lead to up to $1.6 million in fines for the company. Donald Trump and his family were not charged in the case.
  • German law enforcement arrested at least 25 people Wednesday in what authorities there said was a QAnon-inspired plot to overthrow the government. The group was planning violent attacks on government institutions, including Germany’s parliament, and began organizing in November 2021.

The West Debuts its Shiny New Oil Price Cap

A Liberian-flagged oil tanker transfers crude oil from the Russian-flagged oil tanker in May 2022. (Photo by Angelos Tzortzinis / AFP) (Photo by ANGELOS TZORTZINIS/AFP via Getty Images)

There’s a geopolitical squall brewing in the Turkish straits. 

Instead of passing through on their way to and from the Black Sea, about 20 oil tankers are sitting at anchor while their insurance companies duke it out with the Turkish government over whether the country can require guarantees of insurance coverage even in the event of sanctions violations as a condition of passage through its waters.

The tanker pileup isn’t yet large enough to rock the global oil market, but it’s an early unexpected consequence of the new Russian oil price cap set by the G7 group of democracies last week. The cap is a bid to undermine the Kremlin’s roughly $20 billion a month oil profits while keeping Russian oil on the market to avoid a punishing energy price spike. After a grace period for cargoes already underway, companies can handle Russian seaborne crude without consequences only as long as it’s purchased at or below $60 a barrel. Those that violate the cap face a 90-day ban from managing seaborne Russian oil or petroleum products. The European Union also largely swore off Russian seaborne crude on Monday.

“Think of it like a carpool lane on a highway, which drivers can use only so long as they fulfill certain conditions,” wrote Edward Fishman, a senior research scholar at Columbia University who formerly helped the State Department design sanctions against Russia. “If Russia and its oil customers transact for a price below the cap, they can use the ‘G7 services lane;’ if they transact for a price that exceeds the cap, they have to find another route.” Since London-based insurers back about 90 percent of Russia’s seaborne crude, and more than half of it is typically carried on Greek vessels, companies looking to sidestep the measures will be scrounging at the edges of the market.

Russian crude has already been selling at a discount. Its flagship crude blend, Urals, closed at about $62 a barrel Monday and $57 Tuesday—creeping below the cap and well below benchmark Brent crude’s $80 per barrel. Russian crude has sold above the cap in recent weeks, but even so, $60 a barrel would be more of a profit skim than a slash—and countries including Ukraine, Poland, and Estonia aren’t happy. “Today’s oil price cap agreement is a step in right direction, but this is not enough,” Estonian foreign minister Urmas Reinsalu wrote Friday. “Why are we still willing to finance Russia’s war machine?”

Supporters of the agreed cap level—including the United States—argue it dampens Russian profits while remaining high enough to disincentivize a major production cut, stabilizing the market. “The price cap will encourage the flow of discounted Russian oil onto global markets and is designed to help protect consumers and businesses from global supply disruptions,” Treasury Secretary Janet Yellen said in a statement Friday, adding that countries such as China or India that are likely to continue buying outside the cap can “bargain for steeper discounts.” So far the market seems to agree: OPEC held its output goals steady after the cap announcement, and Brent prices have slipped rather than skyrocketing as they might on fears of a sudden shortage.

Russia will likely join Iran and Venezuela as oil markets where the diminished opportunity for legitimate profit motivates monkey business in the margins. Commodities trader Trafigura reportedly estimates that about 10 percent of the world’s oil tankers are “dark” vessels willing to play games—send false location signals, swap oil with other ships at sea, change flags, paint over ship names—to obscure their ownership or cargo source. And industry analysts have reported a spike in such “dark” sanction-dodging activities by Russian affiliated tankers since the war in Ukraine began. The Treasury’s sanctions administration office has already warned companies against artificially inflating insurance, customs, and other costs to launder above-cap payments for Russian oil. 

Meanwhile, Russia and companies in the Middle East and Asia have been buying up used tankers to help skirt sanctions—analysts estimate Russian-affiliated companies have bought or reallocated about 100 tankers this year. The price of a 20-year-old Aframax tanker suitable for loading up at Russian ports reportedly leapt about 90 percent from January to November, according to shipping data company VesselsValue.

Plenty of analysts aren’t fond of the price cap, concerned it’ll distort markets and distract from cutting dependence on Russian fuel. “Time would be better spent on measures which reduce gas demand or supporting those who suffer most from high gas prices,” argued Alex Barnes, a senior visiting research fellow at the Oxford Institute for Energy Studies. “Wholesale price caps will make it more difficult to balance supply and demand.”

Nor is it certain that the cap will succeed. If oil prices spike, the incentive to violate the price cap would also rise—potentially fueling widespread evasion—so the Western countries involved plan to review the cap’s level regularly and adjust it as needed. Russia could also refuse to play ball and cut production as it’s threatened to do by refusing to work with price-cap-compliant buyers. “We will sell oil and petroleum products only to those countries that will work with us under market conditions, even if we have to reduce production a little,” Russian Deputy Prime Minister Alexander Novak said this weekend, per a translation. But Russia hasn’t made any such move just yet, and cutting production could also hurt countries like China that the Kremlin doesn’t want to alienate. 

If the cap does prove effective, Western countries will have a new tool in their sanctions belt—and will have set a precedent that could make OPEC producers nervous. Regulators have pushed back on suggestions of a group of buyer nations demanding lower oil prices worldwide, insisting that the price cap is only about undermining Russia’s ability to fund its invasion. “This is not about a global buyers cartel for all oil,” Treasury official Ben Harris said Monday. “This is about oil that is coming out of Russian soil and nothing else.”

With Georgia in the Rearview, All Eyes Turn to 2024

Democratic Sen. Raphael Warnock’s narrow victory in Georgia last night wasn’t a surprise to Andrew, who spent lots of time talking to voters in the Peach State this year—and last week. In a piece for the site this morning, he looks at why Herschel Walker fizzled and what his loss means for his most prominent backer’s 2024 presidential bid.

“[The runoff] was something even more remarkable than a Trump rebuke,” Andrew writes. “It was a race where the former president, his loyalty demands, and his obsessions just didn’t play a definitive role in the outcome.”

In the days leading up to Tuesday’s runoff election, plenty of Walker’s own supporters seemed to feel the same way. 

At a Walker rally in Columbus last week, I talked to Jimmi McCarthy, who runs the Republican Women of Muscugee and Harris Counties group. How much did Trump’s involvement matter? “He’d matter more if he could vote here,” she laughed.

“Right now we need to focus on Herschel,” she added. “Maybe another day we can focus on Donald Trump, but right now we need to focus on Herschel Walker.”

Still, Georgia Republicans aren’t turning against Trump en masse. 

Mentions of the former president by Walker surrogates drew plenty of cheers from the crowd late in the runoff campaign. And yet many seemed ready to move on.

“Personally, I’d love to see somebody else at this point,” said Matt Whitney, an attendee of a rally in Woodstock who works in tech sales. “You know, not that I hate him, I just think the country’s burned out on him. … Somebody who’s a fighter but less divisive in some ways would be better.”

“I wish that Trump wasn’t running again,” said Beth Tower, who works for a Georgia Caterpillar dealer and repair business. “Because I feel like it’s gonna be more divisive—I feel like they dislike him so much that they will fight even harder just to keep him out versus if we found another candidate. I think he’ll have people that are Republicans and Democrats trying to not have people vote Republican just because of that.”

Asked whether he was leaning toward supporting anyone else in the 2024 Republican primary, Whitney mentioned Florida Gov. Ron DeSantis. “What he did in Florida—I remember Florida being a swing state, and it’s no longer a swing state as it stands. It’s insane, right? And he’s effective. … He can punch back, but he doesn’t need to make himself always the story.”

Others brought up DeSantis too—though not always by name. “I like the Florida governor myself,” Jennifer Stevenson, a teacher, told me. Or here’s Beth Tower again, asked who she sees as the GOP standard-bearer now: “Who’s the Florida dude?”

Worth Your Time

  • With today marking the 81st anniversary of the attacks on Pearl Harbor, take a few moments to read this 1948 retrospective from the late Maj. Gen. Sherman Miles, the head of the Army’s Military Intelligence Division in 1941. “Over two thousand men died at Pearl Harbor. They did not die in vain,” he wrote. “Their sacrifice counted heavily in the great score that brought us final victory. But it did not count on the day the Japanese caught them unprepared and got away almost unscathed. For that the Hawaiian commands were directly responsible. Beyond that lay the system under which our armed forces were organized and operated—complete separation of the Army and the Navy, no unity of command, and decentralization within each service. That system may be criticized after the event, since in Hawaii it failed in its essential function: it did not produce, afloat or ashore, the reaction expected by higher authority or required by the crisis. Perhaps too much stress was put upon it in a country loath to admit the danger it faced, and in military establishments not taut on the starting line, not yet geared to war. It remains to be seen whether the recent merger of the forces—land, sea, and air—guided by the lessons of a global war, can be made effective, or whether pre-Pearl Harbor conditions are inherent in a democracy before the shooting starts. They had better not be, for the next surprise attack will be quite another story.”
  • What’s the exciting new commuting option that’s also striking fear into the hearts of bushmeat poachers all across Mozambique? The electric bike. Park rangers in the East African nation have long found it highly difficult to foil the efforts of poachers. One reason? Their gas-powered bikes announced their presence from more than a mile away, making it easy for the hunters to scamper. Now, Andy Jones reports for Wired, some rangers are swapping their rides out for silent e-bikes from Sweden. “The element of surprise is very important,” one ranger says. “Forests and wetlands are the most difficult terrains for us to cross, but the silence of the bikes is by far and away their greatest attribute, as well as their very low running costs.”

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Toeing the Company Line

  • Reminder: The Morning Dispatch is still accepting applications! If you’re interested in helping put this newsletter together on a daily basis, be sure to check out our job listing here. Questions? Shoot a note to with “TMD Job” in the subject line.
  • Do the results in Georgia put the final nail in Trump’s political coffin? Is the Supreme Court poised to dramatically change state election administration? And most importantly: Why does Esther have communist propaganda hanging in her apartment? Steve, Andrew, Esther, and Price discussed all this and more on last night’s edition of Dispatch Live (🔒). Members who missed the conversation can catch a rerun—either video or audio-only—by clicking here.
  • In yesterday’s Uphill, Haley talks with GOP Rep. Chris Smith of New Jersey about his priorities for the Congressional-Executive Commission on China in the coming years. Plus, a look at the coming debate in the Senate over whether to classify Russia’s war in Ukraine as a genocide.
  • In his latest edition of Boiling Frogs (🔒), Nick reflects on his knee-jerk response to the Twitter Files and what led him to initially dismiss the findings out of hand. “It’s a shameful thing for an intellectual, especially an intellectual who writes for a living and is adjacent to journalism, to have plunged into ‘scoff’ mode before viewing the evidence behind a blockbuster claim,” Nick writes. “Although my skepticism ended up being justified, it’s no excuse for poor instincts.”
  • This week’s Sweep (🔒) informs readers about how to read all the way-too-early 2024 primary polls. “When it comes to presidential primary polling, the best data isn’t going to try to figure out who will win a nominating contest that is 13 months away,” Sarah notes. “We want the vibes!”
  • Scott Lincicome is back on The Remnant today to discuss his new book, Empowering the American Worker: Market-Based Solutions for Today’s Workforce. Predictably, things get nerdy, as the conversation explores education policy, the demands of urban living, and the great vampire-werewolf debate. Where is the government going wrong in its approach to the workforce? Can relying on the free market ever create problems? And how bullish should we be about remote work?
  • On the site today in addition to Andrew’s piece, Harvest unpacks the Twitter Files, Price explains the today’s Supreme Court arguments over North Carolina’s congressional district maps, and Jonah argues the primary process for nominating president and congressional candidates is bad for the country.

Let Us Know

Do you think the Russian oil price cap will have its intended effect?

Declan Garvey is the executive editor at the Dispatch and is based in Washington, D.C. Prior to joining the company in 2019, he worked in public affairs at Hamilton Place Strategies and market research at Echelon Insights. When Declan is not assigning and editing pieces, he is probably watching a Cubs game, listening to podcasts on 3x speed, or trying a new recipe with his wife.

Esther Eaton is a former deputy editor of The Morning Dispatch.