Treasury Secretary Janet Yellen has departed for Asia, where she will seek to gain support for a plan to attempt a price cap on Russian oil as the US is looking to hurt Russia’s profits while keeping gas prices down. Yellen will meet with officials in Japan and then will head to Indonesia to attend a summit of G20 finance ministers.
Yellen is pushing the idea of a price cap over fears that EU sanctions on Russian oil that will take effect by the end of the year could send oil prices to $200 per barrel, which would translate to Americans paying $7 for a gallon of gasoline. The EU sanctions ban the import of Russian oil to most of its members, but more importantly, will ban European companies from providing Russian oil shipments with insurance.
Russian oil shipments still rely on insurance from firms based in the EU and Britain. Russia will be able to find other ways to insure its shipments, and officials have hinted at providing state guarantees to get around the ban, but the initial shock could still send global prices soaring. Under Yellen’s plan, Russian oil shipments could still be insured if sold at the set price, although it would require amending EU sanctions.
But experts and analysts are also warning that attempting to put a cap on Russian oil could also make prices skyrocket. The plan is almost doomed to fail as it requires cooperation from Moscow, which could respond by reducing oil output. Analysts at JPMorgan Chase said that oil could shoot up to a “stratospheric” $380 per barrel in the worst-case scenario if Russia retaliates.
The price cap would also require cooperation from India and China, which have both significantly stepped up their purchase of Russian oil. As a result, Russia is profiting more from oil sales than it was before the war. Both India and China are already purchasing oil from Russia at a discount and have little reason to cross Moscow by complying with a price set by Washington.
Yellen will have a chance to discuss the price cap with China and India’s finance ministers at the G20 summit in Indonesia. Russia will also be present, but a Treasury official told The New York Times that the US delegation won’t have any contact with the Russian one. Secretary of State Antony Blinken attended a meeting of G20 foreign ministers last week and also avoided the Russian side as the Biden administration has abandoned diplomacy with Moscow.
Is this as — dumb — as it seems? Isn’t Yellen our “premier” economist? Does economics preclude common sense?
Apparently but then, what else is new?… ;-}
Yes to all … silly sock puppets … but the real players behind the scenes, what are their real plans?
Yea, these are the ‘experts’ working at the top level of U.S. Gov’ment. We’re doomed!
I learned in my 11th grade Economics Course that this doesn’t work.
I think Yellen is trying to constrain Russia’s revenue without relying on sanctions. If China and India were to buy-in, it would be like a confrontation between a monopolist and a single buyer. But China and Russia benefit tremendously from the current market that charges a low price to friendly countries and a high price to unfriendly countries. There really isn’t any inherent incentive to go along with her proposal.
Yes, there is clearly no carrot, but there is always a stick -presumably, the threat of economic sanctions.
US decision makers are beginning to grasp that sanctions can cut both ways and that they have to be selectively applied.
To put it crudely, we can get away with alienating a few small countries at any given time. But the cost of alienating several large players at the same time could be very high.
Good point. Sanctions for purposes of geo-strategic power are counterproductive. One could cheer sanctions on barbarically criminal regimes like Israel and Saudi Arabia, were one not oneself criminal. The naked hypocrisy certainly alienates “the street” and stiffens the spine of the offended regime. Meanwhile Russia and China and India have gained all the “soft power” which they probably don’t strictly deserve, … except that they are willing to call out the bully.
That never seem to work.
well, yes and no. Its true they haven’t caused regime change in Cuba, Venezuela, Iran or Russia; but they have succeeded in causing a desperate amount of suffering by their populations.
“The plan is almost doomed to fail as it requires cooperation from Moscow.”
and
“There will be significantly less oil on the market, and its price will be much higher. Moreover, higher than the predicted astronomical price of $300-400 per barrel,” Medvedev said.
Wow, she’s a F$##ing idiot, or she’s serving her masters to dismantle our economy and set the stage for WWIV. I’d go with the latter.
Just another delusional bureaucrat as Andrei Martyanov says. No one in government in the West is educated or has a clue how the world works.
Doesn’t abandoning diplomacy show our complete inadequacies?
We must have some skill set…
F*ck that cow. Really.