U.S. Treasury Secretary Janet Yellen will seek support for the U.S. idea of capping Russian export crude oil prices during an upcoming visit to Asia next week, the Associated Press has reported.
Yellen will participate in the G20 meeting of finance ministers in Indonesia and also travel to Tokyo and Seoul to make a case for an oil price cap. China is not on her itinerary, the report noted, but Yellen has called on China to use its special relationship with Russia to bring a faster end to the war in Ukraine.
The Russian oil price cap was one of the main items on the G7 agenda during last month’s meeting of the world’s biggest economies, where the leaders agreed to study ways of enforcing it but admitted it would need the support of large importers, notably China and India.
The Prime Minister of Japan, Fumio Kishida, suggested earlier this month that the cap should be placed at half the current price for Russian crude. Russian oil already sells at an often steep discount to alternatives, and a further cut in half would put the price close to the level Russia uses for its federal budget.
Analysts, however, argue that the price cap weapon is unlikely to work because of challenges in securing enough support for it from both consumers of oil and producers. Also, the implementation of the measure appears to be quite complicated.
The scenario that seems to be under discussion is to tie prices to insurance coverage as almost all global maritime insurance is concentrated in a handful of Western companies.
There is also the question of how Russia responds to a price cap. “Do we really think that Russia will actually accept this and not retaliate? I think this sounds like a very, very good theoretical concept but it is just not going to work in practice,” Energy Aspects’ Amrita Sen told CNBC earlier this week.
By Irina Slav for Oilprice.com
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