The price has to be high enough for Russia to keep producing, according to Janet Yellen
The US is planning to limit the price paid for Russian oil but at a level that would still be profitable enough for production to be continued, Treasury Secretary Janet Yellen said in an interview with the Wall Street Journal published on Wednesday.
“We have heard some concern about the possibility that Russia would simply stop producing. I would say that it doesn’t really make a lot of sense as a Russian response… We would expect to set the price cap at a level that would clearly be profitable for Russia to continue to produce,” Yellen was quoted as saying.
According to the official, the price-cap mechanism would require that any tanker carrying Russian oil only receive financing and insurance from US, UK and European Union institutions if the sales price of the oil is below the cap. According to Yellen, many countries would have no choice but to accept the price cap, given that a number of the globe’s major maritime insurance companies are based in either the EU or UK.
“It makes it easier if at least they put a price cap in place… But even if they don’t, this sanction will apply to Western banks and insurance companies that they’re going to be dealing with, and so they’re going to be affected by it. But it doesn’t hurt them. It helps them,” Yellen stated.