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Russia pledges to cut oil to countries that sign price cap Yellen

RRussia will not supply crude oil to countries that sign a plan to cap the price of its oil exports, the head of the country’s central bank said on Friday, a form of resistance to the Biden administration’s plans to limit financing the country’s war.

The price cap plan, which Treasury Secretary Janet Yellen promoted during her trip to Asia last week, is a unique effort to form a kind of “buying cartel” to reduce Russia’s oil export earnings and, therefore, its main source of funding for the war in Ukraine.

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Asked about the plan on Friday at a press briefing in Moscow, Elvira Nabiullina, the governor of the Russian central bank, said: “As far as I know, we will not supply oil to countries that impose such a ceiling, and our oil, [and] petroleum products will be redirected to countries that are ready to cooperate with us. »

Under the plan, participating countries would agree to cap Russian crude at below market price. The aim would be to set prices slightly above Moscow’s marginal cost of production but as close to the number as possible to limit profits.

Nabiullina also suggested the plan could upend global oil markets, echoing former Russian President Dmitry Medvedev, who warned earlier this month that global oil prices could “surpass $300-$400 a barrel. “if the price cap was put in place. Analysts have also warned that there is a risk of an increase, although their estimates are much more modest – projecting between $140 and $200 a barrel if Russia halts production.

A senior US Treasury Department official said yesterday that the price cap could come into effect as early as December to coincide with the European Union’s insurance ban on maritime imports.

“We are following what the Europeans have been doing,” Deputy Treasury Secretary Wally Adeyemo said, speaking at the Aspen Security Forum in Colorado. “They introduced the idea of ​​looking to do a price cap, but they also said that by December they plan to have their insurance ban in place.”

Oil exports accounted for nearly $100 billion in revenue for Moscow in the first 100 days of its war in Ukraine, according to a report by the Center for Energy and Clean Air Research.

But the details of the plan, such as where to set a possible price cap, have yet to be decided. The plan also requires strong global buy-in and participation from countries, including China and India, which have benefited greatly from the price of discounted Russian crude. Yellen spoke by phone with Chinese Vice Premier Liu He last week and met with Indian Finance Minister Nirmala Sitharaman on the sidelines of last week’s G-20 summit in Bali, although the outcome of these talks is largely unknown.

Finding the right price is essential: too low, and the leaders risk Russia retaliating and stopping production altogether; too high and the ceiling does not achieve the desired effect.

And if the price cap is successful, “you won’t see any difference in the price of oil,” said James Stock, a Harvard Kennedy School economist who served on the White House Council of Economic Advisers under President Barack Obama. . Washington Examiner in an interview last week.

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“The only thing you would see is a difference between the revenue price for Russia and the profits for the refiners who are able to buy Russian oil,” Stock added.


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