US, EU, G7 and Australia announce new price cap on Russian petroleum products

“Our intent is not to crash the Russian economy,” the official told reporters Friday. “Our intent is to make it impossible for the Kremlin to continue to make the choice of propping up the economy and also paying for their war.”

The agreement between the US, the G7, the European Union and Australia places a price cap on “seaborne Russian-origin petroleum products,” the US Department of Treasury said. There are two price levels: one applies to “premium-to-crude” petroleum products like diesel, kerosene and gasoline, which will be capped at $100 USD per barrel, and “discount-to-crude” petroleum products like fuel oil, which will be capped at $45 USD per barrel.

“The thing that we’re focused on is cutting off the revenue,” the official said. “We’re also going after their military industrialized complex and supply chain so they can’t use the money they have to buy the weapons they need. Our approach to this is really to go after the things that are crucial to the Kremlin’s war effort and their ability to prop up their economy.”

In December, the same group implemented a price cap on crude oil — which the Treasury official said was already impeding Russia’s ability to finance the war. They added Russia had “openly acknowledged” the price cap was hurting the country’s economy. Data released by Russia showed that monthly tax revenues from energy sales declined 46% from the month prior.

Officials shrugged off reports that, despite numerous sanctions, Russia’s economy is still expected to rebound and may even outpace Germany and Great Britain. The senior Treasury official said economically, the country “doesn’t function any longer like a normal economy.”

“They’ve shut it down largely, meaning that if you have money of Russia, they’ll let you keep putting money in Russia, but you can’t take money out. They no longer allow foreign capital coming into Russia,” the official said. “They’re needing to spend more money to prop up their economy because they become a closed economy.”

The reality, the official said, is that Russia’s budget deficit is growing “because the war is costing them more money” because the “bravery of the Ukrainian people” and the “weapons” were a surprise to them.

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