WASHINGTON- The Biden administration is poised to increase outreach to western trading houses, insurers and tanker owners to remind them to abide by the Group of Seven’s price cap on Russian oil as the crude trades over that level, sources and experts said.
The approach reflects a desire by Washington to encourage buyers to adhere to the $60 per barrel cap imposed last December on sea-borne exports of Russian crude by the G7, the European Union and Australia in retaliation for Russia’s war on Ukraine.
The administration is expected to use “soft” tactics, instead of widespread threats of harsh enforcement on potential violators as that could upend energy markets, they said.
“The initial inclination on the part of Treasury is to be soft on it, not to come down like a hammer on tankers and tanker owners, to enforce, but enforce quietly with letters, phone calls,” said a source familiar with the administration’s thinking on the matter.
US officials will likely increase communications with trading houses, tanker owners, insurers and others, reminding them that if western maritime services are used, attestations must be kept showing Russian oil was bought under $60, the source said.
A Biden administration source said such conversations with service providers about their requirements have been constant during the implementation of the caps.
“We’ve been having these types of conversations already and they will continue,” the source said.
The price cap bans Western companies from providing services such as transportation, insurance and financing for the oil sold above the cap.
According to Reuters data, Russian Urals crude has been trading at or above the cap for nearly two weeks. Treasury uses a monthly average of prices to calculate the Urals price, which means it may be a while before the Russian oil price can be considered over the cap.
The Treasury’s Office of Foreign Assets Control (OFAC) says individuals or companies who evade, avoid, or violate the cap could face civil or criminal enforcement actions, including fines, and that it will work with other countries to share information about evasion.
“We are hell bent on ensuring that evasions are not distorting the market,” a senior US Treasury official said.
The administration, however, is set to move slowly, wary of creating ripples in a market that could send rising global oil prices higher.
The administration is in a “policy pickle” because it does not want to come down too hard with enforcement threats and risk boosting global petroleum prices by interfering with the movement of oil, the source with knowledge of administration thinking said.
“They’ll spook the service providers facilitating exports, they certainly don’t want to do that.”
