Zelensky Aide Reveals Top Ukraine Priority After Russian Strikes

Russia's recent missile bombardment demands a "very fast and very effective" response from Ukraine's allies, according to a leading economic adviser to President Volodymyr Zelensky, led with an immediate price cap on Russian oil exports.

Oleg Ustenko told Newsweek from Kyiv on Wednesday that a price cap on oil in the G7, European Union, and NATO—alongside the impending EU embargo on most crude imports from Russia—is the most effective way to defund Moscow's military budget and help Ukraine win the war.

"You're not able to win this war if the Russians continue to get this bloody money for their budget which allows them to conduct this war against us," Ustenko said.

"Their daily bill for conducting war crimes in Ukraine, and conducting their military operation in Ukraine, is roughly $1 billion; they are receiving around the same amount from their oil."

"Everything related to the price cap is extremely important right now; it should be implemented already...Oil is number one, gas is number two."

"Everything had changed even before these latest attacks," Ustenko said of this week's "game changer" nationwide missile strikes, citing Vladimir Putin's mobilization order, the claimed annexation of occupied Ukrainian territories, and repeated nuclear threats.

A G7 price cap agreement would act in parallel with the EU embargo to throttle Moscow's lucrative petroleum exports. The group met this week to discuss the measure, but the summit broke up without a definitive decision.

The cap could be enforced by blocking insurance to Russian cargoes if the oil is being sold above a certain limit. About 95 percent of the global oil tanker fleet is covered by shipping insurers in G7 countries.

The price cap delay has been blamed on disquiet within the EU, especially in Germany, about potential Russian retaliation.

Moscow may decide to ban all oil exports to any countries honoring the price cap, thus driving worldwide oil prices higher and threatening economic instability. Three G7 nations—U.S., U.K., and Canada—have already stopped importing Russian oil.

Ustenko said the price cap delay can be explained by "very slow" political discussions within the EU, as well as "lobbying activities" by influential shipping organizations in Malta, Greece, and Cyprus.

Ustenko said Kyiv expects a price cap to be in place when the EU's embargo on seaborne Russian crude oil comes into force on December 5, as agreed in the bloc's sixth sanctions package declared in May.

"I think there's no way that this price cap mechanism is not going to be introduced," he said. "Now the only questions are the technicalities."

In the six months following Russia's February invasion of Ukraine, Moscow is reported to have earned around $100 billion in income from the oil industry.

Urals crude oil—Russia's major export brand—was trading at around $90 per barrel shortly before the February invasion. Concerns about the coming EU embargo and a potential price cap have seen prices drop to around $70 per barrel in recent days.

Treasury Secretary Janet Yellen said this week that a price cap of around $60 per barrel would cut Russian revenues while still allowing a necessary level of production. Ustenko said Kyiv wants the cap to be much lower.

"In our view—in Kyiv—the level of the price cap should be as minimal as possible," he explained, "which means it should be at the level of marginal production costs of the oil for them."

"I would say that's a level of between $10 and $20 per barrel," Ustenko said, noting that Moscow continued selling oil despite historic low prices of around $20 per barrel for Brent crude in April 2020.

Ustenko also suggested a flexible cap to be reduced in response to further Russian abuses. "They have to have an incentive not to continue their war crimes," he said.

An effective price cap may eventually stem increased Russian oil purchases from neutral giants India and China, both of which are taking advantage of the discount, Ustenko said: "They are very pragmatic."

The two other pillars of support to be strengthened are military aid and financial assistance, Ustenko said. "We definitely need more weapons and ammunition," he said.

Foreign financial aid is needed to help Ukraine cover a punishing monthly deficit—currently around $5 billion and expected to fall to some $3.5 billion next year, Ustenko said. In 2023, Ustenko estimated an annual shortfall of $40 billion which Kyiv hopes the U.S., EU, and international organizations can bridge.

As of late September, the U.S. has provided $8.5 billion in economic assistance to Ukraine, with an additional $4.5 billion in grants requested from Congress. The EU has promised $9 billion, but so far only $1 billion has been delivered; much to Kyiv's frustration.

"The U.S. delivered what they promised, and they delivered what they promised in time, which is equally important," Ustenko said. "This did not happen with the Europeans."

"I wouldn't say it was disappointing but it was a real frustration," Ustenko said.

"Now we are expecting that Europeans are going to deliver everything that was promised before, which is critically important for us," he added, noting the bloc had promised to send some of the money by the end of October and the rest by the end of this year. The EU, Ustenko hopes, will cover at least one third of Kyiv's 2023 shortfall.

Most important, Ustenko said, is that Western unity continues through the looming winter. "Putin wants, in one way or another, to destroy this unity," he said.