WASHINGTON, October 26 (Reuters) – US and Western officials are finalizing plans to put a cap on Russian oil prices, as the World Bank warned that any plan would need the active participation of emerging market economies to be effective.
Officials said no price target had yet been decided, but a person familiar with the process said it would be based on a historical average of $63-64 a barrel – a level that could form a natural upper limit.
This level is in line with recent comments by Treasury Secretary Janet Yellen who said that a price in the $60 range would give Russia an incentive to keep producing oil.
President Joe Biden’s administration saw the devaluation as a way to reduce oil revenues for Russia, a key source of funding for its war against Ukraine, while keeping Russian oil flowing and avoiding rising prices.
The exact price will be determined in the coming weeks ahead of the planned December 5 launch of a European embargo on Russian oil and related restrictions on offshore oil transport and insurance.
A senior Biden administration official said reports of any price variations were incorrect, but declined to elaborate.
US officials contradicted the Bloomberg News report, citing unnamed sources, who said they were forced to scale back plans for the price hike, with fewer participating countries and higher prices.
The administration has told reporters for weeks that the price cap is already bearing fruit by empowering countries to demand bigger discounts from Moscow.
Bloomberg also reported that South Korea has specifically told the G7 countries that it plans to act, and that G7 officials are trying to get New Zealand and Norway on board.
“The White House and the administration continue to work to implement an effective and robust price on Russian oil in coordination with the G7 and other partners,” White House National Security Council spokeswoman Adrienne Watson said in a statement. Reuters.
Yellen told reporters earlier this month that the coalition to reduce prices included the Group of Seven, the European Union and Australia, and that they were “not trying to get other countries to sign up.”
“For us, success is when several countries raise their hand and say ‘We accept 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 countries use the existence of this camp to negotiate low prices.”
PRESSURE IS WANTED
Western diplomats say the price hike already gives India and other buyers of Russian oil a better chance in negotiations with Moscow, allowing them to get good discounts.
Indonesian Finance Minister Sri Mulyani Indrawati told the Jakarta Post in an interview published on Wednesday that Yellen told him that the amount would be set at a level that would be just enough to make a profit, but not a “supernormal profit”.
Sri Mulyani told the newspaper: “If it was 60 (dollars per barrel), it would really fit my budget.
The World Bank said on Wednesday that the G7 oil price ceiling could affect oil flows from Russia, but was an “untested mechanism” and needed the participation of major emerging markets and developing countries to be effective.
She noted that Russia has said it will not trade with countries that have participated in the tariffs.
US officials say the price will be controlled by documents obtained from buyers in local courts.
Additional reporting by Juby Babu in Bengaluru; Editing by David Gregorio and Lincoln Feast.
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