A top U.S. Treasury official welcomed reports that the European Union (EU) has asked the bloc’s member states to approve a $60-per-barrel price cap on Russian oil, saying it would reduce Moscow’s revenue needed to finance its war in Ukraine.
Speaking at the Reuters NEXT conference on Thursday, Deputy Treasury Secretary Wally Adeyemo responded to a Wall Street Journal report that the EU’s executive body has asked its 27 member states to approve the cap, which is below the current international benchmark price of roughly $88 per barrel.
“It looks as if Europe is moving towards implementing a price cap that’s in the range of prices that we’ve been talking about for a while,” Adeyemo said.
European leaders are meeting ahead of a Dec. 5 deadline, when the EU is set to begin implementing a separate embargo on vessel-bound crude oil imports from Russia.
The price cap would require the many EU insurance companies and other firms involved in shipping oil to only deal with Russian crude if it is sold at or under the designated level.
The Group of Seven (G-7) nations have also signaled agreement with implementing a price cap but would need to sign off on the specific proposal.
Adeyemo argued the cap is the latest step to accomplish the U.S. and its allies’ goal to reduce Russia’s revenue while keeping Russian barrels on the market.
A decrease in supply from Russia could increase global oil prices that have served as a contributor to high inflation. The effects are particularly precarious for Europe, which heavily relied on Russian oil prior to its invasion of Ukraine.
“We think that the price ranges that have been discussed accomplish those two goals and will put us in a position where Russia’s revenues come down while we’re ensuring that people get access to reliable cheap energy going forward,” Adeyemo told Reuters.
The exact price cap had been in flux during the negotiations, with some concern that the cap could clock in above the price at which Russia has recently sold its oil.
Adeyemo noted that it has become more difficult to pinpoint Russia’s trading prices following its invasion, because the country’s sales have become less transparent amid a growing sanctions regime against Moscow.
But the Treasury official suggested Moscow has been raking in more than $70 per barrel on average since it invaded Ukraine in February, describing the price cap as an “anchor” that leaders would regularly meet to adjust.
“You can’t look at the price cap in isolation,” he told Reuters on Thursday. “You have to look at our overall strategy for taking apart Russia’s ability to earn revenues, and we have been successful at doing this in areas like finance.”
The U.S. and other Western countries have imposed multiple sanctions packages against Moscow, targeting the financial sector, defense companies and prominent individuals, among others.