The price cap imposed on Russian oil by the G7 countries is not having the desired effect, according to US Treasury Secretary Janet Yellen. Despite the limitations, market prices for Russian crude oil remain high, Yellen said while speaking in Savannah, Georgia. The cap, which was implemented on December 5, set a price ceiling of $60 per barrel for Russian seaborne crude. It was intended to prevent global prices from surging while reducing the revenue earned by Russia from selling its oil.
However, Yellen acknowledged that the effectiveness of the price cap has been reduced. Instead of the set price, Russian crude prices are currently hovering around $100 per barrel, indicating that the cap is not successfully curbing prices. Yellen’s comments were made in response to a question about the high price of Russian crude.
Bloomberg reported that Moscow initially attempted to find replacements for shipping and insurance service providers affected by the cap. However, in recent months, Russia has managed to develop its own alternatives. Yellen noted that Russia has invested a significant amount of time, effort, and money in providing services for the export of its oil. The country has expanded its shadow fleet and increased insurance options, which are not prohibited by the price cap.
Yellen pledged to enforce efforts to prevent evasion of the restrictions. However, she did not provide specific details regarding any new measures that may be implemented. She emphasized that the G7 countries are prepared to take action and will continuously assess whether there are ways to improve the effectiveness of the policy over time.
The intention behind the price cap was to pressure Russia into maintaining high volumes of oil exports. This would ensure stability in global prices. However, the cap has not been successful in achieving this objective. Prices remain high, indicating that Russia has found ways to bypass the restrictions.
The US and other G7 countries will need to reassess their approach to dealing with Russia’s oil exports. It is clear that the current strategy is not yielding the desired outcomes. As Russia continues to find alternatives and evade the restrictions, the international community will need to find new ways to address this issue.