With thousands of sanctions already imposed on Russia to flatten its economy, the U.S. and its allies are working on new measures to starve the Russian war machine while also stopping the price of oil and gasoline from soaring to levels that could crush the global economy. The Kremlin’s main pillar of financial revenue — oil — has kept the Russian economy afloat despite export bans, sanctions and the freezing of central bank assets. America’s European allies plan to follow the Biden administration and take steps to stop their use of Russian oil by the end of this year, a move that some economists say could cause the supply of oil worldwide to drop and push prices as high as $200 a barrel. Washington and its allies want to form a buyers’ cartel to force Russia to accept below-market prices for oil. Group of Seven leaders have tentatively agreed to back a cap on the price of Russian oil. Simply speaking, participating countries would agree to purchase the oil at lower-than-market price. Russia has given no sign whether it might go along with this. The Kremlin also has the option of retaliating by taking its oil off the market, which would cause more turmoil. High energy costs are already straining economies and threatening fissures among the countries opposing Russian President Vladimir Putin for the invasion of Ukraine in February. President Joe Biden has seen his public approval slip to levels that hurt Democrats’ chances in the midterm elections, while leaders in the United Kingdom, Germany and Italy are coping with the economic devastation caused by trying to move away from Russian natural gas and petroleum. The idea behind the cap is to lower gas prices for consumers and help bring the war in Ukraine to a halt. Treasury Secretary Janet Yellen is currently touring Indo-Pacific countries to lobby for the proposal. In Japan on Tuesday, Yellen and Japanese Finance Minister Suzuki Shunichi said in a joint statement that the countries have agreed to explore “the feasibility of price caps where appropriate.” However, China and India, two countries that have maintained business relationships with Russia during the war, will need to get on board. The administration is confident China and India, already buying from Russia at discounted prices, can be enticed to embrace the plan for price caps. “We think that ultimately countries around the world that are currently purchasing Russian oil will be very interested in paying as little as possible for that Russian oil,” Treasury Deputy Secretary Wally Adeyemo told The Associated Press. The Russian price cap plan has support among some leading economic thinkers. Harvard economist Jason Furman tweeted that if the plan works, it would be a “win-win: maximizing damage to the Russian war machine while minimizing damage to the rest of the world.” And David Wessel at the Brookings Institution said an “ unpleasant alternative ” is not attempting the price cap plan. If a price cap is not implemented, oil prices will almost certainly spike due to a European Union decision to ban nearly all oil from Russia. The EU also plans to ban insuring and financing the maritime transport of Russian oil to third parties by the end of the year. Without a price cap mechanism to reduce some Russian revenues, “there would be […]

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