The suicide of Europe—the so called collective west—by means of economic sanctions on Russia will ultimately impact and devastate them far worse, and continue to diligently dig their own graves. Tell me if this statement by U.S. Treasury’s Harris makes any logical rational sense on the part of Russia. Setting aside that the Nord Stream Pipelines have been blasted. Why is the U.S. Treasury orchestrating this?
Many analysts and experts doubt that the price cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing because top importers China and India haven’t signed onto the price cap, and because Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.
“As long as we preserve the flow of Russian oil, we consider this a win,” the U.S. Treasury’s Harris said at the conference today, as carried by Reuters.
“The price cap can be considered a release valve on the (EU) sanctions package,” Harris said, noting that “It transforms the ban from an absolute ban to a conditional ban.”
“This oil cap will help reduce Russia’s revenues and keep global energy markets stable,” European Commission President Ursula von der Leyen said.
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Why is the U.S. Treasury orchestrating this?
But concern is high that the EU sanctions will drive oil prices still higher, increasing economic pain in countries sanctioning Russia where inflation has already hit multi-decade highs. The United States also wants to shelter emerging markets from the ripple effect of sanctions, Harris said.
The risks have put the United States and the G7 in the paradoxical position of trying to guarantee Russian output, albeit at prices that deprive Moscow of revenue for its invasion.
The price at which Russian oil sales will be capped has not been decided, Harris said, adding it will be high enough to provide an incentive to maintain output and above the marginal production cost for Russia’s most expensive oil well.
European Union ambassadors reached an agreement on Wednesday to impose a new package of sanctions on Russia, including banning maritime transportation for Russian oil to third-party countries unless the oil is sold below or at a certain price cap.
“Ambassadors reached a political agreement on new sanctions against Russia – a strong EU response to Putin’s illegal annexation of Ukrainian territories,” the Czech rotating presidency of the EU said in a tweet today.
In fine print it is stated that all EU countries must agree.
The eighth package of sanctions includes “Prohibition of maritime transport of Russian oil to third countries above the oil price cap and a ban on related services.” The additional sanctions also extend import bans on goods such as steel products, wood pulp, paper, machinery and appliances, chemicals, plastic, and cigarettes. The EU is also banning the provision of IT, engineering, and legal services to Russian entities and is expanding the tech-export ban.
The political agreement on the price cap contains measures to soften the impact of the sanctions on EU member states with large shipping industries and fleets, such as Greece, Cyprus, and Malta, sources with knowledge of the matter told Bloomberg.
Earlier this week, Ben Harris, Assistant Secretary for Economic Policy at the U.S. Treasury Department, said that the Treasury is looking to structure a three-phased approach to the G7 sanctions and price caps on Russian oil to keep Russian crude and products flowing, but at lower prices. The G7 group of the most industrialized nations will first target Russia’s crude oil, then move on to include diesel at a second stage. Finally, the lower-value products such as naphtha will be part of a third phase, Harris said at the Argus European Crude Conference in Geneva on Tuesday.
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