Andrew Duehren, WSJ
WASHINGTON
EnergiesNwet.com 11 01 2022
The Treasury Department said that ships loaded with Russian oil before Dec. 5 won’t be subjected to U.S.-led price cap on Russian oil, as Washington attempts to reassure anxious oil markets about its plan for new sanctions.
Beginning on Dec. 5, the U.S. and its allies will ban companies in their countries from providing maritime services to shipments of Russian oil unless the oil is sold below a set price.
But the rollout of the plan has faced delays, creating uncertainty in oil markets. Traders, insurers, banks and shippers are already handling Russian oil set for delivery in December as shipments from Russia’s ports on the Baltic Sea can take 45 to 60 days to reach buyers in Asia.
To try to address concerns from oil market participants about the plan’s timeline, the Treasury Department’s new guidance states that shipments of Russian oil that are loaded before Dec. 5 and unloaded at their destinations by Jan. 19, 2023, will be exempt from the cap. Shipments of Russian oil loaded on or after Dec. 5 will still need to be sold under the price cap in order to have access to Western insurance, financing and shipping services.
U.S. officials conceived of the price cap as a way to try to keep Russian oil available on global markets and avoid a contraction in supply—while still reducing Russia’s revenue from its oil sales. They have pushed it as a way to scale-back the European Union’s sanctions banning the insurance and financing of Russian oil outright, a step that U.S. officials fear could drive up global oil prices.
Finding a balance between building a sanctions mechanism that is flexible enough to entice companies to participate in it but still strict enough to cut into Russia’s profits has proved a challenge for the U.S. and its allies, particularly as they deliberate over the price for the cap. U.S. officials have said they are considering a range of factors as they study where to set the price, including Russia’s marginal cost of production for oil and the price its oil has historically fetched on global markets.
Treasury officials see Russia’s average prewar oil price at around $65 a barrel. Brent crude traded for around $94 a barrel on Monday. Russia has sold its oil for a discount of roughly $20 a barrel this year since its invasion of Ukraine, though before the war Russian Urals crude closely tracked the price of Brent.
U.S. officials had sought to have the price cap announced by mid-October, but a production cut by the Organization of the Petroleum Exporting Countries and its Russia-aligned allies slowed talks on the topic, according to people familiar with the matter.
Some oil analysts believe Russia might opt to sell oil through the price cap if the level is high enough. Others doubt that Russia will ever agree to a price set by the U.S. and its allies, and Russian officials have threatened to cut off its oil supply in retaliation for the move.
Biden administration officials have said that they think Russia won’t opt for cutting off a large amount of its oil supply because of the damage that would do to its long-term production capacity and its relationship with buyers.
Write to Andrew Duehren at andrew.duehren@wsj.com
wsj.com 10 31 2022
