(Bloomberg) -- Deputy US Treasury Secretary Wally Adeyemo said the coalition of countries working toward implementing a price cap on some Russian oil exports would set that cap “well above” Russia’s cost of production to make the program palatable enough for Moscow.
“Our goal is to make sure that we’re setting it well above the price of production in order to create incentives for Russia to continue to sell into the price-cap coalition,” Adeyemo said Wednesday at the CNBC Delivering Alpha conference in New York.
Adeyemo didn’t give a dollar figure for where the price cap might be set. Previously, he has said Russian budget reports have listed the country’s average cost of production at $44 a barrel. Brent crude is currently trading above $86.
“We’re going to work with our allies and partners to figure out the price,” Adeyemo said. “We’re going to be transparent about that price to the world, in order to put other countries in a position to better negotiate going forward.”
European Union members, along with the UK and Switzerland, agreed earlier this year to prohibit their companies from providing services -- such as insurance and financing -- that support seaborne shipments of Russian oil anywhere in the world, beginning Dec. 5.
The US, fearing that that will block Russian oil from reaching the global market and cause prices to spike, has pushed a plan that would allow buyers to access critical maritime services, provided they buy Russian oil under an agreed price ceiling. The aim is to prevent a surge in global crude costs and at the same time to limit Russia’s revenue as it pursues its war in Ukraine.
The plan was endorsed earlier this month by governments of the Group of Seven wealthy nations. EU members have yet to agree to alter their sanctions to accommodate the price cap.
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