US Treasury Secretary Janet Yellen for the first time directly named the cost of a barrel, which Western countries intend to take as a basis for setting a price ceiling for Russian oil. The US administration is pushing back from $60 a barrel, she said, which would allow Russia to keep the oil industry profitable, but significantly reduce its oil revenues as long as it continues to wage war in Ukraine. The minister's words are quoted by Reuters.
“Obviously, this price would allow Russia to produce and sell oil profitably,” the head of the US Treasury said, noting that for quite a long time Russia had been making up the budget without problems at prices around $60.
At the same time, the price of $60 is still the benchmark that the US is discussing with its allies, who are ready to join the restrictions against Russia. Also, for the first time, the timing of the introduction of the ceiling on oil prices became clear – they will try to synchronize them with the introduction of a partial oil embargo by the European Union, which should come into effect from December 5, 2022.
In recent months, the discount on Russian oil relative to the benchmark Brent oil has dropped to $17, while Urals oil is trading at $75 per barrel. The introduction of a price ceiling, as Western countries expect, will reduce the income of Moscow, which will have to offer oil to its partners at even greater discounts. US Deputy Treasury Secretary Wally Adeyemo says Russia is already trying to secure long-term contracts for oil supplies with some countries, offering prices well below Brent. He believes that the forced discount is the result of upcoming restrictions.
At the same time, the United States does not believe that the introduction of such restrictions will lead to a shortage of oil on the world market – on the contrary, they are confident that these measures will protect countries from too high oil prices. The Russian side holds the opposite opinion: Russian President Vladimir Putin is convinced that such sanctions will only lead to a shortage of oil on the market, which will inevitably lead to an increase in fuel prices. Also, the Russian side has repeatedly stated that it will not supply oil to those states that join the restrictions of Western countries.