The US says a cap on Russian oil prices would save billions of dollars for importers like Turkey and Thailand: report

Russia has rerouted its oil exports away from Europe towards Asia. Suriyapong Thongsawang/Getty Images

• A price cap on Russian oil could save 50 emerging markets billions of dollars a year, the US estimates.
• EM countries are getting hammered on oil import prices right now, a US Treasury official told the FT.
• The US is seeking other countries' support for the planned G7 price cap, which aims to hit Moscow's income.

A proposed price cap on Russian oil could mean importers in the largest emerging markets pay billions of dollars a year less for oil than otherwise, according to US Treasury estimates reported by the Financial Times.

The findings came from a Treasury study, which looked at the impact of two alternatives on the global oil market: a system allowing shipments priced below a set level, and embargoes without those exemptions. 

The planned G7 price cap could save the 50 largest emerging market and low-income countries — ranging from Turkey to El Salvador and Thailand — about $160 billion annually in spending on oil imports, the study found.

But the Treasury didn't specify what the capped price level would need to be to yield the billions in savings, according to the FT. An official from the department also said there is "significant uncertainty" around the estimates, the Tuesday report said.

The G7 countries — which includes Canada, France, Germany, Italy, Japan, the UK, and the US — agreed to set a price cap on Russian oil in early September. The measure is aimed at squeezing Russian revenues and so curb Moscow's ability to fund its war against Ukraine, and to stabilize global crude prices.

Under the proposals, refiners, traders, and financers would not be allowed to handle Russian crude oil unless it was sold below the price limit. 

That would benefit the US as a net exporter of energy, the Treasury official said. But it would pay off even more for less-developed countries in Central Asia and Europe that are dependent on oil imports.

"The impact is far greater under any reasonable assumptions for emerging markets, which are just getting hammered right now," the official said, per the FT. 

"This means that countries have a significant incentive to benefit from the price cap, including purchasers like China and India, and that all net oil importing EMs would benefit from lower oil prices," the official added.

The US has been trying to rally countries like China and India to support the G7 price cap plan, saying the two Asian countries could benefit by buying more cheap barrels. China and India have been heavy purchasers of Russian oil since the invasion of Ukraine, as sanctions forced Moscow to offer big discounts. 

The proposal could face headwinds as the price of oil has risen recently thanks to concerns that OPEC and its allies will soon agree to cut oil production quotas by 1 million barrels per day. That supply squeeze could lift oil prices as high as $100 a barrel, analysts told Insider. 

Brent crude futures, the international benchmark, soared to a high of $127.98 a barrel in early March. They were up 2% to trade at $90.61 at last check Tuesday, while US benchmark WTI crude futures were about 1.7% higher at $85.10.