US Accelerates Introduction of 'Russian Crude Oil Price Cap'... Opening a New Front?

[Asia Economy New York=Special Correspondent Joselgina] The United States and other Western countries are accelerating the introduction of a price cap on Russian crude oil. As criticisms arise that sanctions against Russia amid the Ukraine war have had limited effect, the introduction of the price cap is approaching, leading to analyses that a new front will open between the West and Russia. Russia recently decided to cut gas supplies to France following Germany.

According to the Wall Street Journal (WSJ) and others on the 31st (local time), the Group of Seven (G7) countries, including the United States, are expected to approve the introduction of a price cap on Russian crude oil at a finance ministers' meeting on September 2.

John Kirby, White House National Security Council (NSC) Strategic Communications Coordinator, confirmed related discussions during a phone briefing that day, stating, "The price cap is the most effective way to reduce revenue from Russian oil." He emphasized, "Lowering oil prices will not only reduce Putin's income but also help global energy prices."

Janet Yellen, Treasury Secretary, also met with UK Treasury Secretary Nadim Zahawi in Washington DC that day and said, "I am positive about the significant progress our team and the entire G7 have made to realize the price cap."

The price cap proposed by the US essentially means that countries will not purchase Russian crude oil exceeding a set price limit. Methods mentioned include allowing transportation only of products below the agreed price through the oil transport network governed by the G7 or not providing ship insurance for transactions exceeding the cap. Earlier, G7 foreign ministers confirmed in a joint statement on the 2nd that they are reviewing various measures, including a comprehensive ban on transportation services for Russian crude oil not purchased below the internationally agreed price. According to the International Monetary Fund (IMF), the G7 accounts for over 30% of the global economy.

The WSJ reported, "Western countries will announce a plan on Friday (September 2) to reduce Russia's energy imports without raising international oil prices," adding, "This will open a new front in the West's previously unsuccessful efforts to squeeze Russia's energy imports." However, the outlet also noted that officials are still grappling with several complex questions about how the price cap will operate.

Russia is estimated to have earned $97 billion (approximately 130 trillion KRW) from energy exports alone from January to July this year. According to the Institute of International Finance (IIF), Russia's revenue from oil and natural gas sales from January to July totaled $97 billion, with oil alone accounting for $74 billion (approximately 100 trillion KRW). This is more than the amount before Russia's invasion of Ukraine. The International Energy Agency (IEA) estimated that Russia's monthly average revenue from oil sales this year is $20 billion, a 37% increase from last year's $14.6 billion. Despite soaring international oil prices, oil sales volume has not significantly decreased.

These figures indicate that Western strategies have not been effective, according to major foreign media. India, China, and others have actually increased their imports of Russian crude oil significantly compared to last year. Leading oil-producing countries such as Saudi Arabia and the United Arab Emirates (UAE) are also purchasing Russian crude oil and selling it on the international market.

Questions surrounding the price cap continue. The key issue is blocking indirect imports by countries like China and India. Other countries may formally participate but pay Russia additional prices through other means. Experts predict that secondary sanctions will also be difficult in such cases. Ultimately, market confusion is inevitable.

Treasury Secretary Nadim Zahawi also emphasized, "It will be most effective when the broadest possible support is secured before implementation," adding, "There is still work to be done, such as persuading more countries to join."

After rising sharply, international oil prices recently fell to levels before Russia's invasion of Ukraine. On this day, October West Texas Intermediate (WTI) crude oil prices on the New York Mercantile Exchange closed at $89.55 per barrel, down $2.09 (2.3%) from the previous session. Major foreign media also reported that Russian crude oil is being sold on the market at discounts exceeding $20 per barrel.

This content was produced with the assistance of AI translation services.