US Treasury: Setting Price Cap on Russian Refined Oil Complex... Doing Our Best to Reach Agreement

Janet Yellen, U.S. Secretary of the Treasury
Photo by Yonhap News

[Asia Economy Reporter Seongpil Cho] Janet Yellen, U.S. Treasury Secretary, expressed on the 21st (local time) that she is facing difficulties regarding the issue of setting price caps on refined petroleum products such as Russian diesel, which is being pursued as part of sanctions against Russia.

While touring Africa, Secretary Yellen met with reporters in Senegal and mentioned that although Western countries are working on setting price caps on Russian refined petroleum products, the market is complex and it may not go as planned, Reuters reported. She explained that discussions are being finalized on individual price caps applied to high value-added products sold with a premium on crude oil and low value-added products such as fuel oil.

Secretary Yellen noted that setting new price caps is confirmed to be more complicated than crude oil, considering the variety of refined products, price structures, and the importance of ensuring continuous market supply of Russian diesel. She said, "Although it is more complicated, we are trying to find a way to achieve the goal by setting broader caps on Russian crude oil." She emphasized, "There is always a possibility that things may not go as planned, but since we have studied these markets very closely, I believe we will derive a series of caps that achieve the same goals as those accomplished with Russian crude oil so far."

The Western countries' setting of price caps on Russian refined petroleum products is being pursued as part of additional sanctions on Russia's energy industry. Earlier, the Group of Seven (G7), the European Union (EU), Australia, and 27 other countries limited the price of Russian crude oil to below $60 per barrel starting December 5 last year. Due to this measure, shipping companies transporting crude oil exceeding the price cap have been unable to use services from U.S. and European insurers.

The EU has also decided to introduce a price cap on natural gas for one year starting from the 15th of next month to prevent a surge in natural gas prices. In addition, Western countries including the U.S. are discussing setting price caps on refined petroleum products, which are judged to deal a greater blow to Russia than crude oil or gas. Secretary Yellen evaluated that the crude oil price cap implemented in December has lowered the price of Russian crude oil and has been successful so far.

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