Finance ministers from major industrial nations said Friday that they plan to impose a price cap on Russian oil, setting into motion an ambitious effort to cut off Russia’s main source of war funding without spiking oil prices.
The cap will be implemented through a prohibition on services that allow shipping of Russian oil purchased above the price cap, the ministers said in a statement.
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Leaders said they plan to have it in place by Dec. 5, when a European Union ban on seaborne imports of Russian crude takes effect, to ensure maximum impact.
Ministers did not announce a price for the planned cap, though they said the initial cap would be based on a range of technical inputs and that the price level would be revisited as necessary.
Senior Treasury Department officials said this morning that the price will be set “above the price of production” — high enough to encourage Russia to continue to produce, they said, while still putting downward pressure on the country’s high oil revenues.
“By committing to finalize and implement a price cap, the G-7 will significantly reduce Russia’s main source of funding for its illegal war, while maintaining supplies to global energy markets by keeping Russian oil flowing at lower prices,” Treasury Secretary Janet Yellen said in a statement.
Hours earlier, Russia vowed to stop selling oil to any countries that participate in the price cap.
“Companies that impose a price cap will not be among the recipients of Russian oil,” Kremlin spokesman Dmitry Peskov told reporters, describing the price cap as an “absurd decision” that would “lead to a significant destabilization of oil markets.”
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But this concern was dismissed by State Department sanctions coordinator James O’Brien. Russia “needs to keep its energy machinery running and needs the money,” he told reporters in Brussels. “What it chooses to do is its decision.”
Senior Treasury Department officials reiterated that sentiment on a call with reporters this morning. “Ultimately, it’s going to be in Russia’s economic interests to sell [oil] for less because the biggest source of their revenues is selling energy,” one official said.
