Comment TOKYO — Finance Secretary Janet L. Yellen welcomed Japan’s leaders after arriving here on Sunday, dining with the country’s top economists, meeting with senior executives from Sony and Panasonic and lighting incense in the wake of former Prime Minister Shinzo Abe. But beneath the public fanfare, Yellen’s hosts quietly voiced concerns about the potential fallout from her push to create a new global price ceiling on Russian oil. Japanese officials said they were worried that Russia could retaliate against the price cap by curbing natural gas exports to Japan, a senior finance ministry official said, hurting the country’s economy at an already precarious time. Yellen sought to reassure the Japanese that the United States would help meet their energy needs. However, she still needs to convince many international colleagues that her plan to reduce Russia’s huge revenue from energy sales will not destabilize the global economy. After her visit to Japan, Yellen flew to Indonesia on Wednesday for meetings of finance ministers from the Group of 20 industrialized nations, where she will try to rally a much wider range of countries to commit to buying Russian oil only at a discount rate. If successful, her campaign could deal a significant blow to Russia’s war effort and help prevent the United States and the rest of the world from sinking into economic recession. Otherwise, the West could continue to send billions to Russia or face soaring energy prices fueling a global recession. Rising energy prices this year have already hit economies in the United States and elsewhere, largely contributing to the new 40-year high US inflation hit in June. Yellen thinks she has a solution. “We had two motivations: to deprive Russia of revenue as much as possible to reduce its ability to wage war against Ukraine and to protect the global economy from the negative effects of the war,” Yellen told the Washington Post on Wednesday. in an interview while traveling between Japan and Indonesia. Russia’s tax revenue ‘will increase significantly to more than $180 billion’ This story is based on interviews with more than a dozen people, several of whom spoke on condition of anonymity to discuss details of private diplomatic talks. They include US and European government officials and other domestic and international experts who have been briefed on the Treasury Department’s lobbying for the price cap. The campaign kicked off with a private dinner in April featuring the world’s most powerful economic leaders, overcame initial concern from other parts of the Biden administration, and is now shifting to focus on international leaders beyond America’s closest allies. Yellen’s major showdown with Moscow could have huge consequences — for the war effort, for the US and global economies and, potentially, for the personal legacy of America’s first female Treasury secretary. Already, Putin has fueled fears that he could respond to the price cap by cutting energy exports. International rivals such as India and China could step in and buy Russian oil above the price ceiling, depleting the West’s energy supply even as Russia continues to make money. And, at least for now, big questions remain about how the price cap will be implemented. Untangling these diplomatic knots will fall to Yellen. Blocked from many of her top priorities both domestically and internationally, the finance minister has become absorbed in rallying the world to her proposal. That’s made the ambitious former Federal Reserve chairman an unlikely commander in the West’s economic war — a macroeconomist who marshals forces on the economic battlefield. “If it succeeds, if it succeeds even partially, and you get to eat into Russia’s revenue – that’s a huge issue,” Daniel said. Fried, who served on the National Security Council under previous administrations and is now at the Atlantic Council, a D.C.-based think tank. “There are huge, huge risks. But there’s a lot to be gained if you can handle it.”

Yellen’s pitch began in April On the evening of April 21, as the West weighed its next move to confront Russia’s war in Ukraine, Yellen gathered some of the world’s most powerful economic leaders for a private dinner in Washington. The obvious potential moves appeared to have huge risks. Russia has continued to earn billions of dollars in energy sales despite US and European efforts to impose an unprecedented sanctions regime on the Kremlin. Before the war, Russia shipped about 3 million barrels of crude oil a day. But demand for energy has soared as the world recovered from the coronavirus, and that number has approached 4 million barrels a day, according to Simon Johnson, a professor at the Massachusetts Institute of Technology who served as chief economist at the International Monetary Fund. In an effort to hold down prices, the West exempted energy from sanctions and continued purchases of Russian oil undermined its pledges of solidarity with Ukraine. Ukrainian President Volodymyr Zelensky pleaded with allies to immediately stop buying oil from Putin. As they began working on a sixth package of sanctions this spring, European officials discussed targeting insurers that underwrite tankers carrying Russian oil – the vast majority of which are British or in the European Union. Removing insurance from ships carrying Russian oil would prevent them from accessing certain international waterways, while also undermining the financing needed to transport the oil. But in internal analyses, Treasury staff found that such a move could cause the price of oil to soar above $150 a barrel and continue to rise, two people familiar with the matter said. (It recently peaked around $120 a barrel, but has since fallen closer to $100.) Worst-case scenarios suggest price disruptions could be even higher. A senior finance ministry official said estimates show that around 3 to 5 million barrels per day of Russian oil could be excluded from global energy markets. The United States could face a 1970s-style oil shock, and what had begun as a limited energy crisis could drag down the global economy. Up until that point, Yellen had been publicly confident that the war would not plunge the United States into recession. But if Europe were to pass a ban on insurance companies, that calculus could change. Treasury officials had already begun discussing the idea of ​​a price cap when Europeans began pushing for a ban on their insurance. Treasury aides realized that banning insurance could be an ideal mechanism to implement the price cap proposal, giving them a vital choke point in the Russian oil supply chain. “There’s always been the question, ‘How do you implement the price ceiling?’” Yellen told The Post. “That was a great enforcement mechanism.” Yellen made her first major pitch to the Group of Seven economic leaders when they gathered over short ribs in the Treasury Department’s second-floor dining room, which overlooks the White House. Simply cutting off Russian oil exports to the West could backfire, Yellen warned. Rather than depriving the Russian war machine of revenue, this move could raise the price of oil – meaning Moscow would make even more money than before. Sanctions also risked crippling Western economies by sapping their energy, Yellen warned, creating a domestic political backlash that could undermine support for the war. When Yellen set the price ceiling, some Treasury ministers had immediate questions about how it might work. But Yellen argued that this plan could allow the West to solve a vexing economic and diplomatic puzzle, allowing Russian oil to flow while cutting into the Kremlin’s single biggest source of revenue. The ministers began to discuss.

Yellen sent top aides on a global campaign Yellen’s plan was met with skepticism both at home and abroad. State Department and Energy Department officials were initially lukewarm on it, according to two people briefed on internal administration discussions. Energy aides were concerned that Russian oil could flow outside official channels, making it harder to trace, the people said. (An Energy official said in a statement that the department “scrutinizes every policy that we produce or that we are asked to analyze by other parts of the government” but that it “fully supports” the effort. State Department officials have also now joined the diplomatic push for the upper limit.) Some European officials also initially floated the idea. Germany was already struggling to convince EU allies to support a gradual oil embargo. The price cap was initially seen as a potential distraction from that effort. (Treasury officials have defended the cap as a way to augment, rather than replace, the oil ban, trying not to dictate Europeans’ decisions.) Three of Yellen’s top aides — Wally Adeyemo, the deputy Treasury secretary; Elizabeth Rosenberg, assistant secretary for terrorist financing and financial crimes; and Ben Harris, assistant director for economic policy — were sent to lead the effort internationally. They flew to Brussels and met with top European officials, raising questions and concerns raised by the Germans, French, British and others at the G-7. The European Commission played a key role in winning over the allies. Sometimes, Treasury negotiators found that different parts of the government of the same country would have different views on the plan. When Rosenberg and Harris reached an impasse, or if an administration seemed uneasy about the idea, Yellen would call in a senior official to keep the negotiations moving. After months of back and forth, the G-7 approved the idea in principle in June. Although it remains unclear how committed European powers are to actually carrying out the plan, the…