The U.S. has been forced to scale back a plan to impose a cap on Russian oil prices in the face of growing risks in financial markets brought on by crude volatility, Bloomberg reported Wednesday.
Instead of imposing a strict lid on prices that would have been observed by a broad group of countries, the U.S. and European Union likely will settle for a looser cap at a higher price than once envisioned, with just countries in the G-7 and a few others committed to abide by it, according to the report.
An earlier U.S. plan championed by U.S. Treasury Secretary Janet Yellen called for a price cap of $40-$60/bbl, which was intended to cut into Russia’s cash flow, but officials involved in the plans reportedly are considering a cap at the higher end of the range or above, despite concerns the plan would allow Russia to continue gaining sizable revenue from sales.
Vladimir Putin has threatened not to sell oil to anyone who participates in a price cap, a threat U.S. officials once dismissed but now is increasingly seen as viable.
Doubts about a Russian oil price cap increased after OPEC+ announced its 2M bbl/day production cut; some U.S. officials believe the move undermines any price cap, and President Biden publicly accused Saudi Arabia of siding with the Kremlin.