Washington Floats Tariff on Russian Oil

"BRUSSELS -- The U.S. is talking with the European Union about ways to limit global energy price increases that could be caused by an EU-proposed embargo on Russian oil, looking at other options such as setting a tariff on imports of Russian oil, U.S. Treasury officials said.

Treasury Secretary Janet Yellen, who was in Brussels on Tuesday, has said the proposed EU embargo on Russian oil could significantly raise oil prices globally.

Even as the EU debates a Russian embargo, the U.S. is talking to European allies about a tariff or possible price-cap mechanisms like a buyers cartel, which would prevent Russia from benefiting from oil-price rises, while keeping the cost of oil stable for European and other buyers.

A possible tariff could go into effect ahead of the oil embargo, which would be imposed at the end of the year for many EU countries. The U.S. sees a tariff as having a more immediate impact on the revenue Russia derives from its oil sales, according to the officials. A tariff would reduce Russian revenue from oil sales, while allowing Europe to purchase oil and reducing stress on global energy markets, according to the officials.

"It is critically important that they reduce their dependence on Russian oil. We're very supportive of it," Ms. Yellen said after meeting with European Commission President Ursula von der Leyen on Tuesday.

The commission declined to comment on the U.S. ideas, but Ms. von der Leyen said on Twitter that the EU and U.S. "will keep on coordinating closely" on sanctions.

The EU's executive body two weeks ago proposed a phased-in oil embargo that would ban the import of Russian crude oil in six months and prohibit the purchase of Russian refined products by year's end. Hungary and Slovakia were given extra time to transition away from Russian oil.

At the time, the commission explored other ideas, including tariffs and placing Russian oil revenue into escrow accounts but they didn't move forward, EU officials said.

However, Hungary has spearheaded opposition to the oil embargo, saying it would have a devastating impact on its economy and pushing for more time and EU funds to help it make the transition in exchange for support. There are growing concerns among EU officials that Hungarian Prime Minister Viktor Orban's government will veto the proposal entirely.

In recent weeks, Ms. Yellen's caution about an oil embargo has filtered into European discussions, although it didn't ultimately stop the European Commission from proposing the oil ban. 

German officials have said they don't believe tariffs on Russian energy imports are practical, fearing they could provoke Moscow to cut off supplies and wouldn't stop non-European countries from stepping in and scooping up Russian oil instead.

With the oil embargo already hanging in the balance, Washington's push for temporary measures has the potential to further complicate the EU's already difficult discussions. Officials are eager to have the embargo agreed to well before a summit of the bloc's leaders at the end of May.

"It would be more helpful if [the U.S.] got on the phone to call Budapest to close ranks than . . . floating new ideas," an EU diplomat said." [1]

1.  The Ukraine Crisis: Washington Floats Tariff on Russian Oil
Duehren, Andrew; Norman, Laurence. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 18 May 2022: A.12.