Ben Harris, a senior official at the US Treasury Department, told an oil conference in Geneva on Tuesday that the new sanctions imposed by the G7 countries on Russia would affect its oil and oil products in three phases. Harris, assistant secretary of the treasury for economic policy, said G7 sanctions would initially target Russian crude oil, with sanctions later on diesel and eventually low-value products such as naphtha. The G7 have been working to cut Russia’s oil export profits since its invasion of Ukraine. Many countries have banned imports of Russian crude oil and fuels, but Russia is still able to generate income through increased sales of crude oil to Asia, especially China and India. Harris clarified that no decision has yet been made on the maximum selling prices for oil in Russia, but indicated that they would be high enough to provide an incentive to continue production and would exceed marginal production costs at Russia’s highest-cost oil well. Sanctions imposed by the G7 and the European Union are due to come into effect on December 5th. The European Union will ban sea transportation of Russian oil from December 5 and products from February 5. Three EU diplomats said the proposed new EU sanctions are aimed at hitting the oil price ceiling agreed by the G7 countries. Harris said the oil sector should see G7 sanctions as a way to continue trading, and that the goal is to ensure a continuous flow of Russian oil. “The price ceiling can be considered a control valve within the package of sanctions (imposed by the European Union) … It turns the ban from an absolute ban into a conditional one,” he added.
