U.S. APPEC official rules out secondary sanctions for Russian oil price cap – Reuters

The Minerva Virgo tanker, moored at the oil terminal, is seen after leaving a Russian port around the time that country invaded Ukraine in late February, since US President Joe Biden on March 8 banned the import of Russian energy, giving buyers until the end of April to curtail purchases, as several tankers linked to Russian oil are still in and around US waters, according to Refinitiv data, in Bayonne New Jersey, US, on 22 March 2022. REUTERS/Bjoern Kils/File Photo

SINGAPORE, Sept 26 (Reuters) – A U.S. Treasury official has ruled out secondary sanctions to apply a price cap mechanism on Russian oil exports despite a proposal made last week by U.S. senators.

Democratic and Republican senators proposed last week that the administration of US President Joe Biden use secondary sanctions against international banks to tighten the price cap aimed at capping Russia’s oil revenues while minimizing the impact on world markets and prices. Read more

“We don’t think secondary sanctions are necessary,” Catherine Wolfram, deputy assistant secretary for climate and energy economics at the U.S. Treasury, told reporters on the sidelines of the APPEC 2022 conference.

“We have all of the service providers that are part of the coalition and each country is sort of bringing in sanctions.”

The Group of Seven (G7) countries expect companies in the supply chain, from brokers to banks, insurers and shipping companies, to monitor Russian oil trade and report irregularities. Industry executives and analysts have raised questions about the feasibility of the oil price cap and its enforcement.

Wolfram said authorities will release full information on how the Russian oil price cap will be implemented before European Union sanctions on Russian crude exports take effect on Dec. 5.

U.S. officials said they would consider Russia’s marginal cost of production and historical pre-war Ukrainian prices when setting the price to encourage Russia to continue production. Read more

The price cap will apply to Russian crude oil in all exchanges, but not to refined products that have been produced from Russian crude, Wolfram said.

“Once the oil is substantially transformed, the price cap no longer applies,” she said.

If traders benefit from trade in these products, it still means that the revenue does not go to Moscow, she added.

Wolfram added that she does not expect China and India to formally join the coalition at government level as it would not be in their own interests, but said a number of Indian companies and Chinese companies would find it in their economic interest to continue to use commercial services. provided by G7 countries after the introduction of price caps.

“We have spoken to some Indian importers who consider using Russian insurance to be more expensive than using British or Norwegian insurance,” she said.

“The (US) administration is in close contact with OPEC, which does not like volatility and the idea of ​​large amounts of Russian oil leaving the market, and stresses that the price cap will only apply ‘to Russia.’

Additional reporting by Emily Chow and Chen Aizhu; Editing by Florence Tan and Jacqueline Wong

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