U.S. Senators Propose Secondary Sanctions to Bolster Russian Oil Price Cap Plan

Democratic Senator van Hollen and Republican senator Toomey on Tuesday proposed that the Biden administration to use secondary sanctions on international banks as a move to strengthen the planned G7 price cap on Russian oil. The senators announced a framework for legislation to impose the secondary sanctions, which would target financial institutions involved in trade finance, insurance, reinsurance and brokerage of Russia oil and petroleum products sold at prices exceeding the cap.

Both senators are members of the Senate Banking Committee, which oversees sanctions policy.

The senators argue that if the secondary sanctions target banks, Russia’s ability to evade the price cap through deals with countries not participating in the G7 scheme would become harder.

Van Hollen said it is important to ensure the price cap to be uniformly applied and to achieve that, secondary sanctions are needed.

Toomey said the President should be given authorization to enforce price caps on anyone who buys Russian oil above the capped price.

Meanwhile, the Biden administration is reluctant to impose secondary sanctions, worrying that it would complicate relations with primary importers of Russian oil like China and India.

The U.S. Treasury has said that anyone who falsifies documentation or otherwise hides the origin or price of Russian oil would face consequences under the domestic law of jurisdictions implementing the price cap.

G7 announced its price cap plan this month to limit Russia’s lucrative oil export revenue in the wake of the invasion. Several countries have banned imports of Russian crude and fuel, but Moscow has managed to maintain its revenues through increased crude sales to Asia.

The U.S. Treasury Department believes the price cap will both deny Russia to fund its invasion of Ukraine and keep Russian oil in the market at lower price, reducing potential for price spikes. The Treasury also indicated that it will release guidelines regarding G7’s concern that Russian crude could be blended with oil from other nations to circumvent sanctions.

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