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Secondary sanctions will not be imposed on financial institutions or insurers providing transportation services for Russian oil, a U.S. Treasury Department official said on Monday.
The G7 and its Western allies have been studying for weeks the idea of exempting Russian oil from the maritime insurance and financing ban from the EU only if that oil is sold at or below a certain price that the group has yet to agree to. The price cap mechanism is being designed with the purpose of keeping Russian oil flowing but at a lower price, considering the large volume of Russian exports, whose outright loss would be catastrophic for the global oil supply.
Last week, reports emerged that U.S. senators had put forward legislation that would impose secondary sanctions on Russian crude oil, to target banks and other financial institutions, insurers, and brokers of Russian oil that exceed a specific price cap, which the senators suggest should be imposed no later than March 2023. Targeting banks, the senators said, would make it more difficult for Russia to evade the price cap by making deals with countries that are not a party to the cap discussed earlier this month, outside the G7.
However, speaking to Reuters on the sidelines of the APPEC 2022 conference in Singapore, Catherine Wolfram, Deputy Assistant Secretary for Climate and Energy Economics at U.S. Department of the Treasury, said today:
"We don't think secondary sanctions are needed."
"We have all the service providers that are part of the coalition and each country kind of brings in some sanctions," Wolfram added.
The U.S. official also noted that the upcoming price cap – expected to take effect on December 5 alongside the EU ban on seaborne imports of Russian crude oil – would apply to crude from Russia in every trade, but not to refined petroleum products.
"Once oil is substantially transformed, then price cap no longer applies," Wolfram said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.