The US tried to convince India and China to hit Russia’s oil revenues

US Treasury Secretary Janet Yellen has begun her Asian tour, the key task of which will be to try to convince as many states as possible to join the Russian oil cap mechanism. Yellen has already discussed the possibility of implementing such a measure with Chinese Vice Premier Liu He. Further, the head of the US Treasury intends to raise this issue in negotiations with representatives of India and other countries in the region, writes The Wall Street Journal.

“They listened to us and we agreed to continue negotiations on this issue,” Yellen told the publication, without revealing the details of the negotiations with the Chinese side.

The publication notes that negotiations between the United States and China took place last week, but the parties have only now revealed the very fact of its holding. Moreover, Yellen intends to hold talks with the Indian side on the same issue at the end of this week. According to the publication, Yellen will meet with Indian Finance Minister Nirmala Sitharaman as part of the G20 Finance Ministers Summit in Bali.

In a conversation with the WSJ, Yellen made it clear that the United States does not intend to put pressure on countries to completely abandon Russian oil, she understands that not all countries can afford such a decision. The US wants as many countries as possible to join the "price cap" policy, Yellen intends to convince them that this will be beneficial to them, because they will receive Russian oil at an even greater discount.

“It would be great for these countries to join our initiative, but even if they refuse, the mechanisms we propose will affect Western banks and the ship insurance system. This will not affect the countries themselves, but will only help them,” says the Minister of Finance. Now the vast majority of tanker shipments are insured by American, British or European companies, the banks of these countries are engaged in financial support of transactions. The mechanism provides for a ban for these companies and banks to support transactions if their value exceeds the established ceiling. Thus, even countries that have not formally joined the mechanism will be involved in it.

The idea is contrary to the sixth package of sanctions, which included the introduction of a ban on insurance for the transportation of Russian oil, but if the mechanism with a price ceiling is approved, exceptions will be introduced into it, which will make it possible to manage oil flows from Russia more efficiently. Yellen does not believe that Russia will simply refuse to supply oil to foreign markets.

“We are aware of the fear that Russia will simply stop mining and refuse to comply, but this makes less sense for Russia itself. We intend to set a price ceiling that will be beneficial to Russia, but will still hit its income, ”Yellen explained the idea.

She is confident that refusing to export will hit Russia harder than agreeing to a mechanism with a price ceiling. The head of the US Treasury insists that if Russia stops its exports, then it will have to urgently reduce oil production, and this situation will lead to the collapse of the entire oil industry, because most of the wells will not be able to be revived in the future - thus the entire oil industry of the country will be at risk. As for the price ceiling, the allies have not yet decided, Yellen recalled that the Russian budget has been drawn up in recent years with a basic forecast for oil prices in the region of $40 per barrel, but there is no clarity on the ceiling yet. Within the framework of the G7, a range from $40 to $60 per barrel was called.

World oil prices have become one of the main reasons for record inflation over the past decades around the world. Oil quotes are still at multi-year highs, and the oil embargo and the rejection of Russian energy resources by the EU, the US and other countries have forced a radical change in oil routes. At the moment, India and China have become the main buyers of oil for Russia, Moscow is forced to offer huge discounts to these countries in order to compete with other countries, such as Iran or Venezuela. China and India did not plan to give up cheap oil, but joining the US-proposed mechanism could make Russian oil even cheaper for them.

At the same time, for Russia, any blow to oil revenues will be akin to a catastrophe. According to the latest budget execution data from the Ministry of Finance, in the second quarter, the country's revenues were equal to its expenditures. This happened against the backdrop of a sharp drop in budget oil and gas revenues, which fell over the month by 154 billion rubles (-18%) to 717 billion rubles. At the moment, about 50% of the Russian budget depends on oil and gas revenues - this is a record figure for more than 10 years.

American Daily Newspaper

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