Stocksak: Western officials finalize plans for Russia’s oil-price cap

© Stocksak. FILE PHOTO – A view of tankers in Nakhodka Bay, Russia, near the crude oil terminal Kozmino. This view is from outside Nakhodka (Russia), June 13, 2022. REUTERS/Tatiana Meel

By Andrea Shalal, and David Lawder

WASHINGTON, (Stocksak), — U.S. and Western officials are finalizing plans that will impose a cap Russian oil prices. However, the World Bank warned that any plan would need active participation from emerging market economies for it to be effective.

Officials have not yet set a price range, but one person who is familiar with the process said that the cap would be determined in accordance with the historical average of $63-64 per barrel – a level which could form a natural upper limit.

This is in line with Janet Yellen’s recent comments that a price cap of $60 would encourage Russia to continue producing oil.

The price cap is seen by the President Joe Biden’s administration as a way of reducing oil revenues for Russia (a major source for its funding for its war on Ukraine), while keeping Russian oil flowing, and avoiding price rises.

The actual price of Russian oil will be determined in the coming weeks, ahead of the Dec. 5 European embargo and associated restrictions on transport and insurance of seaborne oils.

A senior Biden administration official stated that reports of any price range were incorrect, but declined to elaborate.

Unnamed sources claimed that officials from the U.S. were being forced to reverse plans to reduce the price cap.

Since weeks, the administration has claimed to reporters that the price cap was already paying dividends by allowing countries access to greater discounts from Moscow.

Bloomberg reported that South Korea had also privately informed G7 nations that it intended to comply. G7 officials were also trying New Zealand and Norway aboard.

“The White House is and the Administration are continuing the course on implementing a strong, effective price limit on Russian oil in cooperation with the G7, other partners,” Adrienne Watson (Wall Street spokeswoman for White House National Security Council) said in a statement sent to Stocksak.

Yellen said earlier this month to reporters that the coalition behind the price cap was comprised of the Group of Seven and the European Union. They were not trying to sign up any additional countries.

“For us success is not going to be how many countries raise a hand to say “We support what you’re doing, and we’re part the coalition.” We don’t want that. We want to see that Russian oil continues to flow into markets, and that countries use the leverage provided by this cap to negotiate lower prices.


According to Western diplomats, the price cap gives India and other buyers of Russian oil more leverage in negotiations with Moscow, which allows them to get good discounts.

Sri Mulyani, the Indonesian Finance Minister, told the Jakarta Post that Yellen had told her that the cap would be set at a level that is just enough to generate profit but not “supernormal profit.”

“If it were 60 dollars per barrel, that would be a great deal for my budget. That would be nice,” Sri Mulyani told the newspaper.

Wednesday’s World Bank statement stated that the G7 oil pricing cap could impact the flow from Russia. However it was an “untested” mechanism and required the participation by large emerging markets and developing nations to be effective.

It was noted that Russia has stated it will not trade directly with countries that participate in the price cap.

U.S. officials claim that the price cap can be regulated by attestations from local buyers.

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