WASHINGTON — The Biden administration’s push to form an international buyers’ cartel to cap the price of Russian oil is facing resistance amid private sector concerns that it cannot be reliably enforced, posing a challenge for the U.S.-led effort to drain President Vladimir V. Putin’s war chest and stabilize global energy prices.
The price cap has been a top priority of Treasury Secretary Janet L. Yellen, who has been trying to head off another spike in global oil costs at the end of the year. The Biden administration fears that the combination of a European Union embargo on Russian oil imports and a ban on the insurance and financing of Russian oil shipments will send prices soaring by taking millions of barrels of that oil off the market.
But the untested concept has drawn skepticism from energy experts and, in particular, the maritime insurance sector, which facilitates global oil shipments and is key to making the proposal work. Under the plan, it would be legal for them to grant insurance for oil cargo only if it was being sold at or below a certain price.
Mike Salthouse, global claims director at The North of England P&I Association Limited, a leading global marine insurer. “If you have sophisticated state actors wanting to deceive people, it’s very easy to do.”
He added: “We’ve said it won’t work. We’ve explained to everybody why.”
That has not deterred Ms. Yellen and her top aides, who have been crisscrossing the globe to make their case with international counterparts, banks and insurers that an oil price cap can — and must — work at a moment of rapid inflation and the risk of recession.
“At a time of global anxiety over high prices, a price cap on Russian oil is one of the most powerful tools we have to address inflation by preventing future spikes in energy costs,” Ms. Yellen said in July.
The Biden administration is trying to mitigate fallout from sanctions adopted by the European Union in June, which would ban imports of Russian oil and the financing and insuring of Russian oil exports by year’s end. Britain was expected to enact a similar ban but has not yet done so.
not solve the world’s oil supply problems. European officials, who have been skeptical, continue to say they are analyzing its viability.