Biden, Congress plans one-two punch to squeeze Russian oil prices

The Biden administration is pursuing an aggressive plan to starve Russia of oil revenues, and Republicans and Democrats in Congress are looking to back that plan with a new sanctions bill to be passed in the coming weeks.

On September 9, the Treasury Department announced it is working with other G7 countries to impose a price cap on Russian oil. Under the plan, Russian crude transported by water from December 5 would not benefit from insurance, finance, brokering and other services provided by the G7 countries unless that oil is sold under a price cap yet to be determined.

The price cap is intended to prevent Russia from raking in “unexpected” profits that it can use to fund its war against Ukraine. On Tuesday, Senator Pat Toomey, R-Pa., said a two-pronged effort is underway in the Senate to ensure countries like China and India cannot circumvent the limit by providing their own financial services to help transport the Russian crude oil to facilitate and thus help Russia generate more profit.

Sens. Pat Toomey, R-Pa., right, and Chris Van Hollen, D-Md., are seen in the US Capitol during a series of votes on the ongoing resolution to fund the government on Thursday, September 30, 2021. (Photo by Tom Williams/CQ-Roll Call, Inc via Getty Ima

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In a hearing on Tuesday in the Senate Banking Committee, Toomey said he is working with Senator Chris Van Hollen, D-Md., on a bill that would impose new sanctions on any non-G7 financial entity that helps Russia oil at higher prices. to sell .

“Senator Van Hollen and I plan to introduce legislation that will complement the government’s price cap schedule and will impose mandatory sanctions on any foreign financial institution worldwide involved in a transaction in Russian oil above the price cap,” he said. toomey. “I intend to work with Senator Van Hollen to get this bill into effect as soon as possible so that Russia can no longer benefit from the oil sales that are financing its war in Ukraine.”

During the hearing, a senior finance ministry official said pressure from the G7 would help other countries pressure Russia to sell its oil at a lower price and thus make it more difficult for Russia to continue its ongoing war in and around Ukraine. Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes Elizabeth Rosenberg said only the Sept. 9 ceiling announcement will have effect.

Janet Yellen Treasury

US Treasury Secretary Janet Yellen speaks with journalists on the sidelines of a meeting of G7 finance ministers and central bankers on May 18, 2022 in Koenigswinter near Bonn, Germany. (Photo by INA FASSBENDER/AFP via Getty Images / Getty Images)

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“We’re already seeing this happening with Russia negotiating huge discounts for the oil it sells to buyers in Asia,” she said. “These rebates are already robbing Russia of revenue it would otherwise use to fund its reckless war.”

She added that 80% of maritime insurers are concentrated in Europe, which will make it difficult for Russia to find other alternatives.

Treasury Department officials have also indicated that they may not need the legislation. A Treasury official told Fox News Digital that Treasury has “sufficient authorities to implement a price cap”. And in July, Deputy Finance Minister Wally Adeyemo said secondary sanctions against other countries are not necessary because there will be “natural incentives” for all countries to join the initiative.

However, both Toomey and Van Hollen said at the hearing that if countries like China or India try to circumvent the G7 ban, it would be best to have new sanctions legislation to enforce the limit.

“That’s why I think it’s important that we address this question,” Toomey said. “I recognize that the vast majority of the market for the service providers comes from companies within the G7. But they don’t have monopolies, and the Chinese and the Indians… are quite capable of playing the role of their indigenous service providers. expand.”

Hermitage Capital CEO Bill Browder told FOX Business that Ukrainian President Zelenksyy a

Russian President Vladimir Putin attends a meeting with top officials on Thursday, March 31, 2022 on aid to the airline industry in Russia amid Western sanctions via videoconference at the Novo-Ogaryovo residence outside Moscow. (Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP/AP Images)

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“You can well imagine Vladimir Putin saying he won’t stick to this price cap, and that will trigger global negotiations that might be willing to buy oil for a little bit above the price cap,” said Van Hollen. “The idea behind this legislation is to provide a unified backstop worldwide.”

The G7 countries have yet to announce a proposed price cap for Russian oil, although reports say it could fall between $40 and $60 a barrel. Toomey suggested that the G7 keep the cap as “low as possible”.

Rosenberg said US and world sanctions have so far taken a devastating toll on the Russian economy, making it more difficult for Russia to continue its war against Ukraine.

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“Russia has been forced to impose draconian capital controls and is burning through its rainy day fund, dramatically eroding its economic base and buffers in unsustainable ways,” she said in her written testimony. She added that the International Monetary Fund expects Russia’s economy to contract over the next two years, suffering inflation above 20%.

“The bottom line is that Russia’s economic picture is bleak and deteriorating,” she said.

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