China considers proposed price cap on Russian oil

The United States pitched to China the idea of capping the price of Russian oil during a virtual meeting last week, U.S. Treasury Secretary Janet Yellen told The Wall Street Journal in an interview published on Wednesday.

Secretary Yellen is on a tour of Asia with stops in Japan, South Korea, and Indonesia this week to seek support for the U.S. idea of capping Russian export crude oil prices.

Yellen first discussed the idea of a price cap on Russian oil with China during an online meeting with Chinese Vice Premier Liu He last week, the secretary told the WSJ.

“They listened and were prepared to have further discussions with us about it,” Secretary Yellen told the Journalists.

China, the world’s largest crude oil importer, is a major importer of Russian oil, too.

Last week, tanker-tracking data showed that China likely imported another 2 million barrels per day (bpd) of discounted Russian crude oil in June after bringing in around the same record amount in May.

This kept Russia as China’s top oil supplier ahead of Saudi Arabia for a second consecutive month.

After their summit in Germany last month, the leaders of the G7 group of the world’s leading industrial nations invited all importing countries to consider a cap on the price of Russian oil.

“We will consider a range of approaches, including options for a possible comprehensive prohibition of all services, which enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultation with international partners,” the G7 leaders said in their final communique.

The countries are still considering the possibility of a price cap on Russia’s oil, but they face a difficult balancing act between trying to limit the Kremlin’s oil revenues, the most significant contribution to Vladimir Putin’s war chest, and not driving international crude prices higher still.