European Union officials are considering a phased embargo on imports of Russian crude as its next response to Moscow’s war in Ukraine.

On Tuesday, Treasury officials in Brussels said there were concerns from some eastern European countries about supply that represented a major obstacle to the plan.

The tariff mechanism to be proposed by the United States would be designed to keep Russian oil on the market but limit the amount of revenue that could flow to Moscow from exports.

Finance ministers and central bank governors from the G7 rich nations were due to meet in the city later this week.

Officials said that since Russian oil sells at a discount to global benchmarks, a tariff will be set at a level that captures both parts of that gap and reduces Russia’s profits.

“But it will have to be low enough that Russia earns more than its production costs, giving it an incentive to continue exporting.

“By keeping Russian oil on the market, it will avoid potential further spikes in the price of oil from a European embargo, which can offset the embargo’s impact on Russian revenues.”

The officials said there was a strong desire among many governments to stop buying Russian oil as quickly as possible, but that carried a high risk that outright embargoes could considerably increase the price of oil.

“The Treasury was looking at pricing mechanisms including tariffs to help protect the global economy from further damage from high energy prices.

“Tariff monies cannot be put into a recovery and reconstruction fund for Ukraine to satisfy a desire to make Moscow pay at least part of a massive rebuilding effort.”

The suggestion came after G7 leader Mario Draghi last week brought up forming a cartel of oil buyers to help limit prices during a meeting with U.S. President Joe Biden. 

(Reuters/NAN)