U.S. not trying to sign up new countries to G7 oil price cap, says Janet Yellen

India is carefully scrutinising it. Ms. Yellen’s comments suggest that this is now moot, from the perspective of whether to join or not

October 15, 2022 03:16 am | Updated 07:23 pm IST - WASHINGTON DC:

A file photo of U.S. Treasury Secretary Janet Yellen at a news conference in the Cash Room at the U.S. Treasury Department in Washington, U.S. July 28, 2022.

A file photo of U.S. Treasury Secretary Janet Yellen at a news conference in the Cash Room at the U.S. Treasury Department in Washington, U.S. July 28, 2022. | Photo Credit: Reuters

U.S. Treasury Secretary Janet Yellen has said that there is no attempt to sign up countries to a price cap on Russian oil that is in the process of being implemented by a coalition of the Group of Seven (G7) advanced economies, the European Union (EU) and Australia.  

Indian officials have, since the announcement of the cap in early September, said that India is carefully scrutinising it. Ms. Yellen’s comments suggest that this is now moot, from the perspective of whether to join or not.

“All of these countries have agreed to ban the provision of services that firms in our countries supply for the transport of Russian oil. And the E.U. sanctions package includes shipping. And beyond that we are not trying to sign up additional countries to a coalition,” Ms. Yellen told reporters on Friday at a press briefing at the International Monetary Fund (IMF) .

The coalition is hoping that as the bulk of shipping insurance is routed through it, buyers of Russian oil who want to avail themselves of trade finance, insurance, and other associated financial services from these Western countries, will adhere to the price cap.

Russia has said that it will not sell to any country that is going to participate in the cap, possibly explaining Ms. Yellen’s comments that the U.S. is relying not on formal participation in the price cap coalition but on altering purchasing incentives.

“And what we really need in the rest of the world is simply for potential purchasers - firms in those countries, in some cases, governments, but usually firms in countries throughout the world - to simply understand that the price cap is going to work,” Ms. Yellen said.

The program’s success is not going to be measured by how many countries sign up for it, Ms. Yellen explained, but for there to be a flow of Russian oil still to the market and for countries to use the leverage provided by the cap to get the oil at lower prices. India has already increased its purchases of Russian oil, at discounted prices, since the country began an invasion of Ukraine on February 24 .

 “So we want to reduce Russia’s revenue and keep that oil flowing,” she said, adding, “We’re not benefiting from the cheaper oil.” Ms. Yellen went on to say she hoped that Africa, Latin American, and Asian countries would now have access to cheaper oil, once the EU “essentially” stopped its purchases. The E.U. has plans to stop its purchases of Russian crude that is delivered by sea in December – or 2/3rds of its Russian imports of crude.  

‘No Decisions Made on Actual Price Level of Cap’

The coalition of countries that are imposing a restriction on the financial services associated with the purchase of Russian oil will jointly decide the appropriate level of the cap – and that price can be changed over time, Ms. Yellen said, emphasising that no decisions have been made about the actual cap.

Also Read | Explained: What is the G7 planning on Russian oil?

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