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Price cap of $60 enough for Russia to continue its oil supplies — US Treasury Department

According to the US government, the price is set at a level that Russia has historically accepted, which is above its cost of production

WASHINGTON, December 3. /TASS/. The US Department of the Treasury believes that the price of $60 will be sufficient for Russia to continue its oil supplies to the global market, the US Department of the Treasury said in a statement.

"The level of the price cap, $60/barrel, is set high enough to maintain a clear economic incentive for Russia to continue selling oil on global markets," reads the statement, released on Friday.

According to the US government, the price "is set at a level that Russia has historically accepted, which is above its cost of production and comparable with prices" Russia sold its oil at prior to the start of its special military operation in Ukraine.

The price cap is linked mostly to a ban on maritime transportation or insurance of oil, delivered to third countries at a price that exceeds the cap.

In this regard, the Department of the Treasury believes that Russia can either sell its oil below this limit or "rely on non-G7 service providers, which are limited in scale, more expensive, and less reliable."

"Given these constraints, reducing the volume of sales would not be in Russia’s economic interest, especially because doing so would mean reducing sales to key emerging markets, including Russian allies," the department said.

According to its estimates, G7 nations "control around 90% of the market for relevant maritime insurance products and reinsurance."

"The Coalition will review and, if necessary, adjust the price cap based on Coalition objectives and market fundamentals. The Coalition will continue to engage with market participants to help ensure updates do not introduce volatility and are practical to implement (including assessing feasible timelines for implementation)," the document says.

Judging by the document, the above-mentioned coalition currently includes only G7 countries, the European Union and Australia. No other participants are mentioned by US documents.

Russia’s stance

Russian Deputy Prime Minister Alexander Novak said on October 13 that Moscow would not export oil to countries who would impose a price cap on Russian oil. "The price should formed by market means, based on the balance of demand and supply," he said at the Russian Energy Week forum.

Russian President Vladimir Putin said on October 12 that Moscow was not going to pay for somebody else’s prosperity and export its energy resources to those who impose price caps on them. He called the practice of price caps "cardsharp tricks" and "flagrant blackmail." Apart from that, in his speech at the Russian Energy Week, the president warned that price capping oil is fraught with the risks of setting price caps in other sectors, which is harmful for the global market economy and the wellbeing of billions of people.