Biden Administration Imposes New Sanctions on Russia to Enforce Price Cap on Oil
The Biden administration is taking new measures to increase the cost of Russia’s attempts to bypass a limit set on the price for its oil, according to senior administration officials. The West aims to enforce more strictly a price cap that was first introduced almost a year ago.
The US Treasury Department has announced sanctions on two entities and identified two vessels as blocked property. These vessels were found to be using price cap coalitions services providers while carrying Russian crude oil above the price gap agreed upon by the coalition. The senior official briefing reporters stated that these steps are meant to send a clear message to Russia that there will be consequences for its actions. The US and its allies believe that the price cap is diverting Russia’s funds from essential military equipment to be used on the battlefield.
The new sanctions, which were announced as part of a series of actions, primarily target the illicit fleet of ships that the Kremlin has built up over the past year. These ships have been transporting Russian oil and oil products and selling them above the price limits set by the West.
The Biden administration is determined to increase Russia’s costs significantly in the next phase. Additionally, the G7 price cap coalition has released a joint statement reiterating the risk of violating price cap rules.
This policy process has been in the works for several months, according to a senior administration official. In December 2022, the United States, G7 allies, and Australia banned the purchase of Russian oil above $60 per barrel if it was shipped, insured, or financed by the West. The goal was to cut off revenues to Russia, which were being used to fund the country’s invasion of Ukraine, while minimizing disruptions to the global oil market.
However, the Kremlin found a workaround by sourcing other means to ship and insure energy, allowing them to sell it above the cap. Treasury Secretary Janet Yellen expressed concern about the reduction in effectiveness of the price cap back in October. Yellen is expected to discuss the price cap and its enforcement with her G7 counterparts in Marrakech this week during the annual meetings of the International Monetary Fund and World Bank.
Speaking from Marrakech, Yellen acknowledged that the policy has significantly reduced Russian revenue. However, she also noted that Russia has been spending huge amounts on its alternative ecosystem to export energy products.
The Biden administration’s new sanctions intend to further deter Russia from bypassing the price cap on its oil. By raising the cost of these attempts, the West aims to enforce the price limit more effectively and prevent Russia from diverting funds towards its military activities.