US and Western officials are finalizing plans to cap the price of Russian oil, as the World Bank warned that any plan would require active participation from emerging economies, Reuters reported.

The introduction of the upper price limit for Russian oil took place as December 5 approached, when the package of EU sanctions adopted at the beginning of June would come into force. The package includes a complete ban on the import of Russian crude oil and oil products transported by sea. This covers 90% of Russian oil imports.

What quote limit can be set

Several officials said a price cap had not yet been set, but a person familiar with the process said the cap would be set in line with the historical average of $63-64 a barrel, a level that could form a natural price ceiling for oil. .

That level is consistent with recent statements by Treasury Secretary Janet Yellen that a price ceiling in the range of $60 a barrel would give Russia an incentive to keep producing oil.

Joe Biden’s administration sees the price cap as a way to reduce Russia’s oil revenues, the main source of funding for its war against Ukraine, while keeping Russian oil flowing and avoiding price spikes.

The specific price will be determined in the coming weeks, on the eve of the planned introduction of the European embargo on Russian oil and related restrictions on the transportation of oil and insurance of these cargoes on December 5.

A senior Biden administration official said reports of any price range were false, but declined to elaborate.

U.S. officials responded to a Bloomberg News article citing unnamed sources who said they would be forced to reconsider price cap plans with fewer participating countries and a higher minimum price.

Some countries already have better negotiating leverage

In recent weeks, the Biden administration has repeatedly told the media that the price cap has already paid off, allowing some countries to demand bigger discounts from Moscow.

Bloomberg also reported that South Korea has also privately told the G7 countries it intends to comply, and G7 officials have also tried to get New Zealand and Norway involved.

“The White House and the administration are following guidance to implement an effective and strong cap on Russian oil prices in coordination with the G7 and other partners,” White House National Security Council spokeswoman Adrienne told Reuters. Watson.

Yellen told the media earlier this month that the alliance pushing for price caps includes the G7, the European Union and Australia, and that she is “not trying to get other countries involved.”

“For us, success is not going to be the number of countries raising their hand to say, ‘We support what you’re doing, we’re part of the coalition.’ We are not looking for that. We want to see Russian oil continue to enter the market and for countries to use the leverage provided by the existence of this limit to negotiate lower prices,” she added.

Western diplomats say the price cap already gives India and other buyers of Russian oil better leverage in negotiations with Moscow, allowing them to get good discounts.

“Would not be bad”

Indonesian Finance Minister Sri Mulyani Indrawati told the Jakarta Post in an interview published on Wednesday that Yellen had told him the limit would be set at a level that would be sufficient to make a profit but not “excessive profit”.

“If it was 60 (dollars a barrel), that would really be in my budget. That would be good,” Sri Mulyani added.

The World Bank said on Wednesday that the G7 oil price cap could affect the flow of oil from Russia, but that it was an “unproven mechanism” and needed the participation of major emerging markets and developing countries to be effective.

The institute noted that Russia has said it will not trade with countries that participate in price caps. U.S. officials say the price cap will be controlled by certificates obtained from buyers in local jurisdictions.