Biden, Congress plans one-two hits to lower Russian oil prices

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

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

The price cap is intended to prevent Russia from taking “unexpected” profits that it can use to finance its war against Ukraine. On Tuesday, Senator Pat Toomey, R-Pa., Said a bipartisan effort in the Senate is underway to ensure that countries like China and India cannot get around the limit by providing their financial services to facilitate the transportation of Russian crude oil and therefore helping Russia generates more profits.

The Sens. Pat Toomey, R-Pa., Right, and Chris Van Hollen, D-Md., Are seen on the United States Capitol during a series of votes on the continued 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 of the Senate Banking Committee on Tuesday, 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. to sell oil at higher prices.

“Senator Van Hollen and I plan to introduce legislation that will complement the administration’s price cap scheme and impose mandatory sanctions on any foreign financial institution worldwide involved in any Russian oil transaction above the price cap. “, Toomey said. “I intend to work with Senator Van Hollen to get this bill passed as soon as possible so that Russia can no longer profit from the oil sales that finance its war in Ukraine.”

During the hearing, a senior Treasury Department official said pressure from the G7 would help other countries to pressure Russia to sell its oil at a lower price and thus make it harder for Russia to finance its ongoing war. in and around Ukraine. Elizabeth Rosenberg, Deputy Secretary of the Treasury for the Financing of Terrorism and Financial Crimes, said that only the announcement of the limit on 9 September is taking effect.

Janet Yellen's treasure

US Treasury Secretary Janet Yellen speaks to reporters 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 are already seeing this with Russia negotiating deep discounts for the oil it sells to buyers in Asia,” he said. “These rebates are already depriving Russia of the revenue it would otherwise use to finance its reckless war.”

He added that 80% of marine insurance providers are concentrated in Europe, which will make it difficult for Russia to find other alternatives.

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

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

“This is why I think it’s important to address this question,” Toomey said. “I recognize that the vast majority of the service provider market comes from companies within the G7. But they have no monopolies, and the Chinese and Indians … are quite capable of expanding the role of their indigenous service providers.”

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On Thursday, March 31, 2022, Russian President Vladimir Putin attends a meeting with senior officials on supporting the aviation industry in Russia amid Western sanctions via videoconference at the Novo-Ogaryovo residence outside Moscow. (Mikhail Klimentyev, Sputnik, photo of the Kremlin pool via AP / AP images)

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“You can easily imagine Vladimir Putin saying that he will not respect this price limit, and that will initiate a worldwide negotiation that he may be willing to buy oil for a while above the price limit,” Van Hollen said. “The idea behind this legislation is to provide uniform support around the world.”

G7 nations have yet to announce a proposed price cap for Russian oil, although reports say it could drop to between $ 40 and $ 60 a barrel. Toomey advised the G7 to keep the limit as “low as possible”.

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

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“Russia has been forced to impose draconian capital controls and is burning its rainy day fund, dramatically eroding its economic base and shock absorbers in unsustainable ways,” he said in his written testimony. He added that the International Monetary Fund expects the Russian economy to contract for the next two years and suffers from an inflation rate of over 20%.

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

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