WASHINGTON, Oct 26 (Reuters) – U.S. and Western authorities are finalizing plans to impose a cap on Russian oil prices amid a warning from the World Bank that any plan will require the active participation of emerging market economies to be effective.
Officials said no price range had yet been decided, but a person familiar with the process said the cap would be determined in line with the historical average of $63 to $64 a barrel – a level that could form a natural upper limit.
Such a level is in line with recent comments by Treasury Secretary Janet Yellen that a price cap in the $60 range would incentivize Russia to continue producing oil.
President Joe Biden’s administration has seen price caps as a way to cut Russia’s oil revenues, a major source of funding for its war on Ukraine, while keeping Russian oil in circulation and avoiding price spikes.
The actual price will be set in the coming weeks ahead of the scheduled December 5 launch of a European embargo on Russian oil and associated restrictions on the transport and insurance of oil transported by sea.
A senior Biden administration official said the reports on any price range were wrong, but declined to elaborate.
US officials pushed back on a Bloomberg News report citing unnamed sources saying they were being forced to scale back price cap plans, with fewer participating countries and a higher price point.
The administration has told reporters for weeks that the price cap is already paying off by allowing countries to demand bigger discounts from Moscow.
Bloomberg also reported that South Korea has privately told G7 countries it plans to comply and that G7 officials are also trying to get New Zealand and Norway on board.
“The White House and the administration remain focused on implementing an effective and strong Russian oil price cap in coordination with the G7 and other partners,” a Security Council spokeswoman said. White House National Adrienne Watson in a statement. Reuters.
Yellen told reporters earlier this month that the coalition pushing for the price cap included the Group of Seven, the European Union and Australia, and that they were “not trying to recruit other country”.
“For us, success will not be the number of countries raising their hands and saying ‘We approve of what you are doing, we are part of the coalition.’ We are not looking for that, what we want to see is that Russian oil continues to flow into the market and that countries use the leverage provided by the existence of this cap to negotiate lower prices .
DOWNWARD PRESSURE
Western diplomats say the price cap is already giving India and other buyers of Russian oil better leverage in negotiations with Moscow, enabling them to secure good discounts.
Indonesian Finance Minister Sri Mulyani Indrawati told the Jakarta Post in an interview published Wednesday that Yellen told him the cap would be set at a level just enough to create profits, but not “supernormal profits”.
“If it was 60 (dollars a barrel), it would really fit my budget. That would be good,” Sri Mulyani told the newspaper.
The World Bank said on Wednesday that the G7 oil price cap could affect the flow of oil from Russia, but that it was an “untested mechanism” and required the participation of major players. emerging markets and developing countries to be effective.
He noted that Russia has said it will not trade with countries participating in the price cap.
US officials say the price cap will be controlled by certificates taken from buyers in local jurisdictions.
Additional reporting by Juby Babu in Bengaluru; Editing by David Gregorio and Lincoln Feast.
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