(Bloomberg) -- The UK supports a plan to cap the sales price of Russia’s oil, one of the first US allies to publicly endorse the effort to cut revenue that funds President Vladimir Putin’s invasion of Ukraine.
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The UK government is confident that a price cap led by the Group of Seven nations can deliver results, Chancellor of the Exchequer Nadhim Zahawi said during a briefing Wednesday in Washington, speaking alongside US Treasury Secretary Janet Yellen. He added, however, that more needs to be done including getting additional nations on board, specifically identifying India, Turkey, South Africa and Norway.
The cap will be “most effective if supported by the broadest possible coalition,” Zahawi said.
The US has been been shopping the price-cap idea recently to major powers and oil buyers as a way to deprive Putin of much-needed funds while keeping prices subdued when European Union sanctions take hold later this year.
The EU’s next round of sanctions over the invasion of Ukraine includes a ban on Russian oil, as well as the use by third countries of the bloc’s companies for insurance and financial services. That ban takes effect on Dec. 5, but US officials are worried that it would drive up oil prices substantially and deliver windfall profits to Russia.
US Deputy Treasury Secretary Wally Adeyemo traveled to India last week to get the nation’s government and oil buyers on board, but left with no commitment. Yellen said Wednesday that “substantial progress” has been made toward a G-7 price cap.
Brent crude, the global benchmark, has eased back below $100 barrel in recent weeks, after hitting almost $140 in March. US officials have warned the prices could return to that level if a price cap isn’t in place to allow the continued flow of Russian oil when EU sanctions kick in.
After plunging in the immediate aftermath of its offensive in February, Russian production has rebounded over the past three months as domestic refining boomed and Asian customers stepped in to take shipments shunned by Western buyers.
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