Yellen: US likely to take steps to enforce $60/barrel oil
- “We are looking at enforcement very carefully and we want to make sure that market participants are aware we take this price cap seriously, and, to the extent Western services are used, we mean business about abiding by the cap,”
- Yellen didn’t describe any specific enforcement actions.
The price cap operates by mandating that Western companies engaged in the handling, trading, or insuring of Russian oil must ensure that the oil is sold at or below the specified cap. Failure to comply with this requirement exposes these firms to potential penalties from the United States and its allies. Following its invasion of Ukraine, Russia has developed its own shipping infrastructure for oil sales, allowing exporters to bypass the imposed price caps. - Despite this, a significant portion of Russia's crude oil and petroleum products continues to be sold with the assistance of Western entities. Analysis by the Centre for Research on Energy and Clean Air think tank revealed that, in the week ending October 1, 37% of the 4.44 billion euros (approximately $4.68 billion) worth of fossil fuels exported by Russia were transported on ships owned or insured by companies in Europe or the Group of Seven advanced democracies.
- As the price of Russia's benchmark crude rose above $60 during the summer, speculation among analysts and traders emerged regarding whether and when the U.S. would intervene. To date, the U.S. and its allies have not publicly penalized any firm for violating the sanctions, which require banks, insurers, and traders to affirm that they are handling oil in accordance with or below the specified price cap, to the best of their knowledge. Some analysts expressed skepticism about the compliance of many Western firms with these rules, particularly if the average price exceeded $60.