By David Lawder

BRUSSELS/Reuters – The European Union might combine its import tariffs for Russian oil with the phased embargo on oil that it wants to place in order to decrease Russia’s energy revenue, U.S. Treasury secretary Janet Yellen stated on Tuesday.

According to U.S. Treasury officials, the tariff idea will be discussed at this week’s G7 finance leaders meeting as an economical less expensive way of siphoning oil revenues away from Moscow and producing quicker results.

According to officials, the tariff plan would keep more Russian oil on the international market. It will also limit price spikes that could be caused by an embargo and reduce the money Russia can make from its exports.

Although the EU’s executive agency, the European Commission has proposed an embargo against Russian crude oil imports. It would be implemented in phases starting next year as a reaction to Moscow’s war with Ukraine. But some Eastern European countries that are heavily dependent on Russian oil objects to this plan.

Yellen stated that she had discussed a range of options to reduce European dependence on Russian oil with President Ursula von der Leyen, European Commission president. She also said that embargoes and tariffs could both be combined.

While we don’t want to give them advice, it’s important that they know some of the issues under review.

Europe currently gets about half the total Russian petroleum product and crude oil exports. That’s roughly about 2.2 Million barrels per daily (bpd), of crude oil, and 1.2 Million bpd petroleum products.

Yellen said that although she supported any EU-27 plan, “it was critical that they reduce their dependency on Russian oil.”

Additionally, she pledged U.S. support to fulfill the bloc’s energy demands. This included working to boost global supplies of oil & gas.

Officials from the Treasury stated that because Russian oil prices are lower than global benchmark crudes, they could set a tariff that captures some of that discount and decreases Russia’s profits.

They said that Russia would need to earn enough to export more than it produces.

According to officials, keeping Russian oil on market would help avoid any potential price increases from an EU embargo. This could reduce the impact of the embargo on Russian revenues.

Officials stated that there is a desire by many countries to end their purchases of Russian oil as soon as possible. However, this comes with a significant risk because embargoes can significantly increase oil prices.

They stated that the Treasury was considering pricing mechanisms, including tariffs, to protect the global economy against further damages from rising energy prices.

The money from tariffs could go into the recovery and reconstruction fund of Ukraine. This would satisfy the desire that Moscow should pay for at least a portion of any massive rebuilding efforts.

After G7 leader Mario Draghi suggested the formation of an oil buyer cartel to lower prices last week during a meeting between Joe Biden, U.S. President.

Yellen stated that the United States is committed to meeting Europe’s energy requirements, and worked with partners to improve exports of liquefied gas (LNG), to Europe.