The price cap imposed on Russian oil by the G7 countries is not working as intended, US Treasury Secretary Janet Yellen admitted on Friday, as quoted by Bloomberg. She pointed out that market prices for crude exported from the sanctions-hit nation remain high.
A $60-per-barrel price ceiling on Russian seaborne crude was introduced by the EU, G7 countries, and Australia on December 5. It prohibits Western firms from providing insurance and other services to shipments of Russian crude, unless the cargo is purchased at or below the set price.
The mechanism was intended to force Russia to continue exporting high volumes of oil to prevent global prices from spiking, but reduce the revenue that Moscow generates by selling its crude.
“It does point to some reduction in the effectiveness of the price cap,” Yellen said during her visit to Savannah, Georgia in response to a question about Russian crude prices, which are now hovering around $100 per barrel instead of the $60 set by the cap.
Bloomberg reported that Moscow had initially tried to replace shipping and insurance service providers, but succeeded in developing its own alternatives in recent months.
“Russia has spent a great deal of money and time and effort to provide services for the export of its oil,” Yellen said. “They have added to their shadow fleet, provided more insurance and that kind of trade is not prohibited by the price cap.”
The Treasury chief pledged to enforce efforts to prevent evasion of the restrictions, but provided no details about any specific new measures.
“We are more than prepared to take action,” she said, adding that the G7 was ready to “consider over time whether there are ways that might make this policy more effective.”
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