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U.S. Working with EU to Cap Russia’s Oil Profits

National

U.S. treasury secretary Janet Yellen | Image by REUTERS

The United States aims to limit Vladimir Putin’s oil profits as it works with the European Union (EU) to put a price cap on Russian crude oil.

U.S. energy security advisor Amos Hochstein said restricting Putin’s profits while ensuring that an adequate supply of Russian crude still reaches the market is a “delicate balance.”

Hochstein said the U.S. was working with colleagues and partners worldwide and in Europe to make sure that when the EU sets the price, it will reflect “a price that restricts Putin’s revenues, restricts his profits.”

Hochstein said it “still incentivizes Russian crude reaching the market” and makes sure “that we have enough supply.” He admitted it is “a delicate balance,” but “the EU is working on it right now.”

This week, the European Union is working on a way to adjust the cap in the future as a measure against Russia in response to its invasion of Ukraine. The deadline for a deal is December 5.

As European leaders have struggled to reach an agreement, U.S. officials stepped in to try to persuade Poland and other EU countries to agree on a deal.

Poland, Estonia, and Lithuania have been pushing for a lower price cap, according to EU diplomats. The disagreement on the limit, specifically designed to cut Russia’s revenue, has delayed its progress.

This week, the European Commission proposed a cap of no more than $62 per barrel, while its original suggestion was a cap between $65 a $70.

The three aforementioned countries argued that because Russian crude is currently trading around the level of the proposed cap, it would not effectively drive down Russia’s oil revenues.

U.S. treasury secretary Janet Yellen spoke to Estonian Prime Minister Kaja Kallas last week in an attempt to reach an agreed-upon price point, according to Estonian news outlet ERR.

Hochstein said the price cap needs to be “responsive to the market, but also [have] a broader perspective.”

“We have to look not just at the lowest possible barrel that Putin is selling, which may be below $65 or $60, but we have to look at the totality of what price they are getting for their crudes,” he continued. “The good news is that he’s getting significantly less money today than he was before, and his economy continues to degrade significantly.”

Hochstein said this price cap is intended to put pressure on Putin so he “understands he can’t continue with bombing indiscriminately against innocent civilians, and now … making sure they don’t have heat in the middle of winter.”

“There have got to be consequences here,” he said. “But we also want to make sure the pressure is felt on Putin and on Russia, and not on the United States and our allies around the world and in Europe.”

However, Russia has reportedly said that it will not voluntarily observe a price cap, and with much of Russia’s oil now going to non-European markets, some observers have questioned whether an external price cap would have much of an effect at all aside from potential escalation of an already tense international scene.

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