People deeply familiar with global oil markets say that they don't believe the price cap plan will work.
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This would avoid a global supply shock while simultaneously reducing Russia's oil revenues. If Russia agrees to sell its oil at a price that is under a certain cap - the level of which is to be determined by the countries imposing the sanctions - it will be allowed access to the services it needs to bring the oil to market.
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What Yellen and the Biden administration are proposing is an "exception" to the ban. Russia would lose its oil revenues, and the rest of the world would experience potentially devastating price increases because of the supply shock created by abruptly removing Russian crude from the market. If fully implemented and successful, the results of the sanctions could be bad for everyone. In theory, this would make it practically impossible for it to export any oil at all in the near term, and much more difficult in the future.įILE - The Russian oil tanker Volgoneft-147 stands in Muscat's Mina al-Fahl port, Feb. The current plan is to cut Russia off from those services beginning late this year. In order to bring its crude oil to market, Russia relies on various transactions with international lenders, shipping firms and insurance companies. The plan that Yellen is proposing is tied to a new set of financial sanctions that the European Union, United Kingdom and the U.S. However, the price cap plan relies on a complicated mechanism that has never been tried before, and some experts in global energy markets have said they believe it will not work. "A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now," she said.
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She also argued that capping the price of Russian oil would further one of the administration's major domestic aims: reducing inflation. She said that cutting its profits from crude oil sales "would deny Putin the revenue his war machine needs." Speaking at a news conference in Bali, Indonesia, before the start of a meeting of the finance ministers of the G-20 large economies, Yellen restated the Biden administration's condemnation of Russia's invasion of Ukraine. The United States is pressing to implement a plan meant to force Russia to sell oil at artificially low prices on the global market, in order to deprive the Kremlin of funding for its war in Ukraine.