G7 wants to set Russian oil price cap 30-45 days before Dec 5: US Treasury official

G7 nations want to to finalize a price cap on Russian crude some 30-45 days ahead of Dec. 5, the date the cap is meant to take effect, a US Treasury official told S&P Global Commodity Insights Sept. 26 on the sidelines of the Asia Pacific Petroleum Conference in Singapore.

“It is not scheduled formally, but hopefully 30-45 days ahead of time by Dec. 5,” said Catherine Wolfram, deputy assistant secretary, Economic Policy, at the US Treasury.

The G7 is considering the pre-COVID price as one of the factors in deciding what the level should be, Wolfram said.

The US Treasury Sept. 9 issued preliminary guidance on the implementation of a maritime services policy and price cap for seaborne Russian oil.

“Russia really faces three choices. One, they can sell at or below the price cap and use G7 and other services. Or two, they can try to find alternatives, they can use their own insurance, they can use their own shipping, Chinese shipping, for instance, and three, they could refuse to sell,” Wolfram said, speaking during an APPEC panel discussion.

“We see several economic and geopolitical costs to that third choice. First, on the economic side, especially as a function of where we set the price cap, we think that it will be capping Russia’s economic self-interest to shut in oil. Secondly, from a geopolitical perspective by shutting oil, they will be denying the provision of oil to low- and middle-income countries, which we think carries geopolitical costs,” she said.

Also, unlike previous sanctions, buyers had an interest in this case in enforcing the sanction, Wolfram said. Buyers’ interest was in transacting at the price cap and making sure they got access to G7 services, and it will apply to every Russian barrel on the water, including those for re-trade.

Meanwhile, Wolfram told S&P Global that companies that take Russian crude at above the capped price after Dec. 5 remain allowed to use EU and G7 services for crude deals from other sources, such as those from the Middle East, as the Biden administration has not supported secondary sanctions.

Wolfram noted EU and G7 countries provided 90% of global shipping and insurance, and provided the majority of financing and payment services for the oil trade.

“Our approach to implementation is really guided by the principle that Russian oil should continue to flow to the global market,” Wolfram said.
Source: Platts