At its core, the cap proposal is an attempt to use the West’s influence over Russian oil shipments to dictate the price Moscow can command for its oil exports.
The cap plan seeks to keep the Russian oil moving to market, but only if it is steeply discounted. Russia could still ship its oil with Western backing if that oil is sold for no more than a price set by the cap. Negotiators are working to set that price, which would be high enough to ensure Moscow would still profit off its oil sales but lower than the price it is commanding now, of about $30 below the global price.
Insurers and financing companies would need to join the effort to make it work. So would many of the countries outside Europe that would buy the discounted oil. But even if some countries refuse to sign on, like China and India, administration officials are confident a well-designed cap would drive down prices anyway — because no country wants to pay more than it has to for any vital commodity.
Ideally, the officials say, the plan could bring down global oil prices by reducing the risk of a future supply disruption, which traders may be factoring into their decisions.
Some experts doubt the plan will work, saying it is ripe for evasion and will still provide Russia with plenty of energy revenue. There is also the chance that a low cap would induce Moscow to refuse to ship any discounted oil, instead paying to cap wells and halt production.
“It’s another half-measure idea, as opposed to making the tough decision to actually stop purchasing Russian crude and using secondary sanctions,” said Marshall S. Billingslea, who was the assistant Treasury secretary for terrorist financing in the Trump administration.
Article source: https://www.nytimes.com/2022/07/09/business/economy/biden-gas-price-cap-russia.html
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