Former US Secretary of the Treasury Steven Mnuchin on a panel at the Future Investment Initiative in Saudi Arabia in October 2022. Mnuchin criticized the G-7’s cap plan this week
Fayez Nureldin | Afp | Getty Images
Former US Treasury Secretary Steve Mnuchin described the G-7 plan for a price cap on Russian oil as “ridiculous”.
Speaking to CNBC’s Hadley Gamble on a panel at the Milken Institute’s Middle East and Africa Summit, Mnuchin said the idea was “not only not viable, I think it’s the most ridiculous idea I’ve ever heard.”
While there are no certainties, sanctions on Russia and Russian officials — which the U.S. and other nations continue to roll out after Russia’s unprovoked invasion of Ukraine — could take effect before the war begins, he said.
“Sanctions used to have a big impact. I think the problem now is that there are limited options … parts of the world are now buying Russian oil outside of US sanctions,” he said.
“But look, the price cap, the market sets the price. So if you put restrictions on higher prices, in a way you make the situation worse, in my opinion.”
The Group of Seven countries – the US, Canada, France, Germany, Italy, Japan and the UK – along with Australia, have reportedly agreed to set a fixed price ceiling on Russian oil from December 5, but the level has not been announced. .
The plan, which has been under discussion for several months, includes a ban on providing certain services such as shipping lines, insurance and financing to buyers of Russian oil unless they sell it at or below the cap.
It aims to limit the Kremlin’s ability to fund the war in Ukraine and protect consumers and households from sky-high energy prices. The new sanctions, which will end all Russian crude oil deliveries to the EU by sea, will come in early December, ahead of a ban on all Russian refined products in 2023.
As Europe seeks to distance itself from Russian oil and gas, Moscow has increased oil sales to countries including China and India, already at a discount to key benchmarks. Energy analysts say getting the cooperation of those countries is essential for any price cap to be effective, but it is unclear how they will react to any final announcement.
Current US Treasury Secretary Janet Yellen said last week that India will be able to buy oil from Russia at any price as long as it avoids Western sanctions, a scenario that would further depress global oil prices and curb Russian oil revenues.
Mnuchin served President Donald Trump’s full term and now works in private equity investing.
On a Milken Institute panel, he said that bringing Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky to the negotiating table was “long overdue” and that the best-case scenario in the near term would be a lull in fighting.
Ukraine has previously said it would enter talks after “restoring Ukraine’s territorial integrity”.
A Kremlin spokesman told reporters on Thursday that “public negotiations are difficult to imagine … One thing is certain: Ukrainians do not want any negotiations.”
Mnuchin has viewed energy security and national security as one and the same thing, and said that when oil prices plunged during the coronavirus pandemic, one of the things he wanted money for was to replenish the US strategic reserve.
He said the Biden administration is “intensely focused on the issue of global warming” and that he is not “downplaying” the problem, adding that he believes it is important not to “discourage investment in the carbon economy.”
“With approvals, and again this doesn’t require legislation, there are things the current administration can do, you know, pipeline needs, infrastructure needs, more drilling. There’s a lot of shale oil. And it’s very economical to produce in these numbers.”
The industry is “starved of capital,” he said.
“We can’t turn around and say to OPEC+, why aren’t you producing more oil when we’re not doing it ourselves.”