U.S. Treasury Says Oil-Price Cap 'Institutionalizing' Russian Crude Discounts

Ukraine has welcomed a $60 price cap on Russian oil agreed by the European Union, the Group of Seven (G7) group of advanced economies, and Australia, but said it should be lowered to $30 per barrel to hit Russia's economy harder.

"We always achieve our goal and Russia's economy will be destroyed, and it will pay and be responsible for all its crimes," the head of the Ukrainian presidential office, Andriy Yermak, said on Telegram.

"But it would be necessary to lower [the cap] to $30 to destroy the enemy's economy quicker," Yermak added.

In reaction to the move, the Kremlin said on December 3 that it would "not accept" a price limit.

Spokesman Dmitry Peskov told the media that the Kremlin was "analyzing" the move, adding, "We will not accept this price cap."

EU ambassadors reached the deal for the $60-per-barrel price cap on Russian seaborne oil on December 2 after breaking a deadlock over the price, with Poland saying it was not low enough.

The G7 and Australia later on December 2 joined the EU in adopting the $60 price cap.

The move is meant to help achieve the goal of restricting Russia's primary source of funding for the war in Ukraine while preventing a spike in global prices.

The cap will keep global markets well supplied while "institutionalizing" discounts created by the threat of such a limit, a senior U.S. Treasury official said on December 2.

Poland had refused to back the price-cap measure over concerns the ceiling was too high, before its ambassador to the EU confirmed Warsaw's agreement on December 2 in the evening.

Europe needed to set the cap by December 5, when an EU embargo on Russian oil shipped by sea and a ban on insurance for those supplies take effect.

The embargo will prevent shipments of Russian crude by tanker vessel to the EU, which account for two-thirds of imports, potentially depriving Russia's war chest of billions of dollars.

U.S. Treasury Secretary Janet Yellen said in a statement that the price cap "will help us achieve our goal of restricting [Russian President Vladimir] Putin's primary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies."

The price cap "will immediately cut into Putin's most important source of revenue," Yellen said.

The announcement is the culmination of months of effort by a coalition of countries, and Yellen commended the "hard work of our partners in achieving this outcome."

With reporting by Reuters, AFP, and dpa