Washington and its allies plan to finalize a price cap on Russian oil in “the coming days” as they seek to cut off a key source of funding for Moscow, the US Treasury Department said on Tuesday.
The price cap would serve as the basis for a ban that will take effect on December 5 and will prohibit companies from transporting or providing insurance for shipments of Russian oil sold above the set price.
Wealthy Group of Seven countries, the European Union and Australia will impose the measure which aims to deprive Moscow of a key source of funds to pay for its war in Ukraine – as well as help cool high global prices for energy.
Russia’s invasion of Ukraine earlier this year sent energy prices soaring, providing windfall profits that helped cushion the impact of Western sanctions on Moscow.
A senior US Treasury official told reporters on Tuesday that the European Union was consulting its members on the price level and that the broader coalition would take steps to implement the cap once the EU process is complete.
“We look forward to the next few days for them to complete their price-fixing consultations, and for us as a coalition to move forward…to implement the price cap before December 5,” added the manager.
The official said there was no reason to believe that Moscow would retaliate against the new policy, as “it is not in its interests”.
“Any action they take to drive up prices will impact their new customers, customers like India and China,” the official said.
Treasury officials have argued that the price cap would allow Russia to make a profit, but deprive them of excess revenue from inflated prices.
The Treasury Department on Tuesday issued guidance to shippers and financial firms involved in transactions on price cap compliance requirements.
The cap will likely be reviewed on a quarterly or semi-annual basis, due to the need to provide market certainty, the official said.
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