The U.S. Department of the Treasury is looking to structure a three-phased approach to the G7 sanctions and price caps on Russian oil to keep Russian crude and products flowing, but at lower prices, according to Ben Harris, Assistant Secretary for Economic Policy at the Treasury Department.
The G7 group of the most industrialized nations will first target Russia’s crude oil, then move on to include diesel at a second stage, and lower-value products such as naphtha in the third phase, Harris said at the Argus European Crude Conference in Geneva on Tuesday.
Last month, the G7 agreed to finalize and implement a price cap on Russian oil, aiming to reduce Vladimir Putin’s oil revenues for his war chest. The G7 finance ministers confirmed in early September they would finalize and implement “a comprehensive prohibition of services which enable maritime transportation of Russian-origin crude oil and petroleum products globally – the provision of such services would only be allowed if the oil and petroleum products are purchased at or below a price (‘the price cap’) determined by the broad coalition of countries adhering to and implementing the price cap.”
The G7 and the EU haven’t decided yet what the price caps would be, Harris said today.
The price cap on Russian crude is expected to come into force in early December when the EU embargo on imports of Russian crude by sea kicks in.
Many analysts and experts doubt that the price cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing because top importers China and India haven’t signed onto the price cap, and because Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.
“As long as we preserve the flow of Russian oil, we consider this a win,” the U.S. Treasury’s Harris said at the conference today, as carried by Reuters.
“The price cap can be considered a release valve on the (EU) sanctions package,” Harris said, noting that “It transforms the ban from an absolute ban to a conditional ban.”