G7 is working on setting a price cap on Russian oil

Limiting the price of Russian oil, which the G7 countries want to establish, will give buyers the leverage to get better prices. This was announced by a representative of the U.S. Treasury Department on Wednesday.

Speaking at a forum in London, Treasury Undersecretary for Economic Policy Ben Harris said the U.S. is having a “positive dialogue” with China and India, two major importers of Russian oil.

The price cap plan, agreed to by the G7 nations, calls for member nations to deny insurance, financing, brokerage, navigation and other services to oil cargoes whose prices exceed an as-yet-unspecified price cap on oil and petroleum products.

According to diplomats last month, the EU is considering setting a price cap on oil that would be consistent with the price agreed upon by the G7.

Harris explained that the price cap, all details of which have yet to be worked out, would be set at a level that would keep the incentive for companies to produce.

“The purpose of the price cap is to keep Russian oil trading, but at lower prices,” the deputy finance minister said. – Because we want to create economic incentives for Russia to continue production, the price will cover the marginal cost of production for the most expensive Russian oil well.”

Although the price level has not yet been set, the goal of the cap is to increase the spread between Russia’s Urals crude and the international benchmark Brent, Harris stressed.

“If we provide the leverage for importers to get the best possible discount, then we are quite happy with that,” said the finance official.