Ukraine is urging the G7 to lower the cap on Russia's oil prices to $30 as revenues decline.

Ukraine is urging the G7 to reduce the price cap on Russian oil to $30 per barrel from the current $60, aiming to increase financial pressure on the Kremlin as the war enters its third year.

Foreign Minister Andriy Sybiha argued this point in Brussels, stating that the existing cap is too lenient given the drop in global prices and the fact that Russian oil is already trading below this level. He asserted that "the reasonable price cap is 30 dollars."

This request coincides with new EU and UK sanctions on Russia's shadow fleet and financial entities enabling it to evade previous restrictions. The EU is considering a lower cap of $50, but Ukraine seeks a more significant reduction.

The timing may be opportune, as Russian oil revenues plummeted to $13.2 billion in April, the lowest in almost two years. The average price of Urals crude was $55.64, well below the current cap, leading to unsustainable conditions. Russia's finance ministry has had to lower its oil and gas revenue forecasts and significantly increase its budget deficit projection for 2025.

However, further reducing the cap could complicate enforcement, as the mechanism only permits Russian oil to access Western insurance and financing below the set price, and enforcement has historically been challenging. A $30 cap might increase pressure but could also drive more oil into gray markets or shadow tankers.

Ukrainian President Zelensky believes that heightened economic strain will compel Moscow to engage in negotiations, stating, "The more pressure there is, the more motives Moscow will have to move towards real peace."

Historically, Russia's oil trade is unlikely to capitulate easily or avoid finding alternative solutions.