US threatens Russian oil exports

Washington wants to force Moscow to comply with the oil price cap mechanism

US Treasury Secretary Janet Yellen issued a stark warning to Russia on Thursday: Comply with a yet-to-be-imposed oil price cap mechanism or face even harsher sanctions.

According to Yellen, if Moscow refuses to go along with the proposal to limit its oil revenue, the EU and US will ban the provision of insurance and other financial services to the country.

I think from Russia’s point of view, a price cap or price exception to a policy that would otherwise be yet harsher on Russia is something that they should be willing to go along with,” Yellen said at a press briefing in Nusa Dua, Indonesia ahead of a meeting of G20 finance ministers and central bankers.

According to Yellen, if Russia refuses to comply with the proposal to limit its oil revenue, the EU and US would be forced to ban providing insurance and other financial services to the country.

So, we’re proposing an exception that would allow Russia to export as long as the price doesn’t exceed a to-be-determined level. Otherwise, Russia faces a situation where it will be completely cut off from those critical services, and that’s likely to shut-in a substantial amount of Russian oil,” the official warned. She said the mechanism should be viewed as “mitigating the impact that the insurance and financial services ban would otherwise have.”

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US explains how Russian oil price cap would work

“It will give Russia a way to continue exporting oil at a price I expect would be quite profitable for them relative to shutting it in,” Yellen explained.

The treasury secretary also noted that global oil prices would undoubtedly rise without the price cap, and expressed hope that India and China would support the scheme, as it “would serve their own interests in lowering the price that they pay for Russian oil.”

Earlier, Yellen said in an interview with the Wall Street Journal that the issue of an oil price cap has already been discussed with China. The Chinese Ministry of Commerce on Thursday confirmed that fact, but did not unveil any details of the conversation. During her trip to the East, Yellen is also expected to hold talks on the price cap with officials from Japan, India, Indonesia, South Korea, and Saudi Arabia, the WSJ reported, citing a senior Treasury official. However, given the many details which should be sorted out in order to finalize the price cap mechanism, US National Security Advisor Jake Sullivan said earlier this week that talks on the issue “will take time.”

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