Auchincloss Calls for Price Cap to Allow More Affordable Oil and Weaken Russia

Thanks to the Office of Jake Auchincloss for contributing this news to Westwood Minute.

Congressman Jake Auchincloss (D, MA-04) is leading a bipartisan letter with Congressman Anthony Gonzalez (R, OH-16) to U.S. Treasury Secretary Janet Yellen, calling for a cap on Russian Oil Prices, along with coordinated sanctions that would prohibit insurance and reinsurance for tankers transporting Russian crude oil and petroleum product. They state that a price cap would "help the democratic world stand with Ukraine," making it more challenging for Russia to fund its war through oil profits, while creating a supply of more affordable oil in the global market.

As described, the proposed price cap would limit the purchase of Russian oil to a specific flat price or price tied to global markets. Countries and entities that purchase oil above the price cap would be subject to sanctions. Insurance for Russian oil shipments would be allowed in the case where oil is purchased at a predetermined discounted price. The Congressmen support the proposed price cap which is endorsed by the G-7 countries, but note that there has been skepticism from industry officials.

Russia's oil export process relies on delivering oil by sea, which the Congressmen say is a weakness in Russia's oil export process which the United States and its allies can exploit. 

"Because of the large volume of its seaborne exports and its limited domestic fleet, Russia relies heavily on foreign-owned oil tankers for its exports, including vessels owned by EU entities. As the insurance bans come fully into force, it is expected that Russia will lose access to any of the foreign tankers currently shipping its oil, which will make it much more challenging for Russia to maintain its current levels of oil exports, especially to more distant markets such as India," the Congressmen state in their letter.

“A well-designed, comprehensive price cap will help the democratic world stand with Ukraine and protect economies threatened by Putin’s weaponization of energy…We agree that the G-7 proposed price cap, which would allow for insurance of Russian oil shipments if oil is purchased at a predetermined discounted price, would strengthen existing sanctions and further damage Russia’s economy," the Congressmen write.

The letter concludes, "Our response to Russian aggression in Ukraine sets the example for all authoritarian countries considering unprovoked violence against another sovereign state . . . We must sustain our commitment to Ukraine and our core, defining belief in a world safe for democracy."

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