G7 sanctions on Russia to target oil, products

The G 7 sanctions on Russia will target its oil and products in three phases, according to senior U.S. Treasury official Ben Harris on Tuesday, as the bloc seeks to limit economic damage while limiting Moscow's funds to wage war in Ukraine.

Harris, the Treasury's assistant secretary for economic policy, told the European Crude Conference in Geneva that Group of Seven sanctions will target Russian crude oil, while later ones will focus on diesel and a third phase will tackle lower value products such as naphtha.

The timing may complicate a plan that is viewed with skepticism by industry players who are worried about sanctions exposure and buyer countries that have not signed up.

Sanctions from the G 7 and the European Union, which is opting for a two-phase ban, are set to begin on December 5.

The economic blocs want to limit Russian profits from exporting oil after its invasion of Ukraine.

The EU will ban shipping of Russian oil from Dec. 5 and of products from Feb. 5, cutting the trade off from financial services and possibly halting it worldwide.

There is a concern that the EU sanctions will drive oil prices higher, increasing economic pain in countries sanctioning Russia, where inflation has already hit multi-decade highs. Harris said that the United States wants to protect emerging markets from the ripple effects of sanctions.

The risks have put the United States and the G 7 in a paradoxical position of trying to guarantee Russian output, albeit at prices that deprive Moscow of revenue for its invasion.

AUSTRIA, As long as we preserve the flow of Russian oil, we consider this a win," Harris said. He said that the price cap can be a release valve on the EU sanctions package. It changes the ban from an absolute ban to a conditional ban. The price at which Russian oil sales will be capped has not been decided, according to Harris, adding that it will be high enough to provide an incentive to maintain output and above the marginal production cost for Russia's most expensive oil well.