Globetrotting and oil capping

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The Treasury Department will step up its push to build global support for a price cap on Russian oil this week, as Assistant Secretary Elizabeth Rosenberg travels to Indonesia and Singapore to pitch her international counterparts and industry executives on the plan.

Rosenberg, Treasury’s assistant secretary for terrorist financing and financial crimes, is among the top sanctions experts in the government leading a shuttle diplomacy effort to bring more countries on board with the two-pronged proposal, which aims to knee-cap Russia’s oil revenue (a key source of funding for the war in Ukraine) while avoiding a disastrous drop in global oil supply.

“We don’t just talk to our closest friends,” Rosenberg told MM. “We’re talking to everybody on this, including other countries where our politics and policies toward Russia are quite different, but where we nevertheless share a definitive commonality in our interest in having affordable energy on the market.”

The clock is ticking: Treasury officials are targeting a Dec. 5 implementation date for the proposal, to coincide with the timing of new European restrictions set to take effect on shipping services for Russian oil exports. (You can read more about the thinking behind the plan here and here.)

The technical work on the mechanics of the cap and other governance issues is just about done, people familiar with the plan tell MM, although discussions are ongoing around the price where the cap will be set. As other countries join the coalition they will likely weigh in, though it’s unlikely to change meaningfully from the range officials are discussing at the moment.

Some reports suggest the price cap could be in the range of $40 to $60, though officials are determined to keep it above Russia’s cost of production — currently around $45 by some estimates — to make sure the Kremlin still has an incentive to keep selling.

What’s next: By mid- to late-October, the U.S. and other G-7 members, as well as other countries in the coalition, expect to each unveil legal frameworks and requirements for the price cap specific to their jurisdictions, we’re told. That would leave about 45 days for refiners, traders, insurers and other service providers to work out compliance plans in advance of the effective date.

Meantime: There’s been plenty of skepticism about the workability of the plan, including from energy industry analysts and economists, as MM has noted previously.

One concern: Whether and how various players involved in the shipping process would be required to attest that the purchase price of the oil complies with the cap. One possibility under consideration is to allow the buyer of the oil to attest to the price to the other companies, rather than requiring each one to independently verify it, according to a person familiar with the plan.

Another potential obstacle: Russian Central Bank Governor Elvira Nabiullina said last month Russia will not sell to countries that impose a cap.

Treasury is plowing ahead, hosting dozens of briefings with players — from refiners to bankers to shipping companies — to explain how they can stay in the market and remain in compliance with the cap.

“It matters enormously that the service providers globally understand this scheme in order to be able to implement it,” Rosenberg said. “Company by company, firm by firm, industry group by industry group, we are getting there.”

IT’S MONDAY — Kate is taking a much-deserved vacation and Sam will be playing host all week. Have a tip, story idea or other feedback for any of us? Hit us up at [email protected], [email protected] or [email protected].

New York Fed three-year inflation expectations out Monday … President Joe Biden will sign the CHIPS bill on Tuesday … Second-quarter productivity and labor cost reports out Tuesday … Consumer price index data comes out on Wednesday … SEC meets to discuss new rules for hedge fund managers on Wednesday… University of Michigan consumer sentiment and five-year inflation reports out Friday

VOTE-A-RAMA Senate Democrats finally delivered on major pieces of President Joe Biden’s climate, tax and health care agenda on Sunday after fending off Republican amendments for roughly 15 hours. Private equity had a hand in the largest roadblock, our Marianne LeVine, Burgess Everett and Jordain Carney report: “Senate Republicans sought to pursue an amendment with Sen. Kyrsten Sinema (D-Ariz.) to change the legislation’s corporate minimum tax. Senate Minority Whip John Thune proposed an amendment that would exempt businesses owned by private equity from Democrats’ new corporate minimum tax, which would be paid for with a one-year extension of a cap on State and Local Tax deductions.”

While that amendment passed with the support of Sinema and six other Democrats – four of whom are up for reelection – Sen. Mark Warner (D-Va.) sponsored a subsequent amendment “that would pay for the change by extending existing limits on how certain businesses can write off their losses for another two years. ‘It’s not my first choice. But it was all good. On balance this package is so good that I’m not going to nitpick. It is historic,’ said Sen. Debbie Stabenow (D-Mich.).”

The House will take up the bill on Friday.

“This bill tackles inflation by lowering the deficit and lowering costs for regular families,” Biden said in a statement on Sunday. “The House should pass this as soon as possible and I look forward to signing it into law.”

LOW HANGING FRUIT POLITICO’S Brian Faler: “Prompted by Sen. Kyrsten Sinema, Democrats are suddenly jettisoning a chunk of their tax-increase plans in favor of a new levy on stock buybacks. Some wonder what took them so long. The 1 percent excise tax on stock purchases is far less controversial than the things it would replace in their climate, tax and health care package … But the buyback tax, which Democrats have been contemplating for months, has been relatively uncontroversial — at least for a tax increase. That’s probably because it is so small. ‘It’s not like business endorsed this, but they also didn’t lay across the train tracks to try to stop it,’ said Todd Metcalf, a former top Senate tax aide now at the consulting firm PwC. ‘This is the lowest-hanging fruit.’”

I WILL SURVIVE — WSJ’s Julie Bykowicz and Miriam Gottfried: “Private-equity lobbyists call it the tax-code provision with nine lives. The tax rate on carried-interest income survived another potential whack last week when Democrats acceded to a demand by Sen. Kyrsten Sinema (D., Ariz.) that a proposal chipping away at it be cut from the Senate Democrats’ tax-and-climate bill … Ms. Sinema said Wednesday night at a fundraiser on Capitol Hill that she viewed changing the tax treatment of carried interest as foolish because projects from roads and bridges to semiconductor manufacturing rely on private equity.”

FALL HIKING SZN — WSJ’s Nick Timiraos: “Fed governor Michelle Bowman said she strongly supported the Fed’s 0.75-percentage-point rate increase last month and ‘similarly sized increases should be on the table until we see inflation declining in a consistent, meaningful and lasting way.’”

San Francisco Fed President Mary Daly on Sunday said it would be “absolutely” appropriate for the open markets committee to raise rates in September if wage growth continues to get outpaced by inflation. “Americans are losing ground every day. So the focus has to be on bringing inflation down,” she said in an appearance on CBS’s “Face the Nation with Margaret Brennan.”

For now, the white-hot labor market should forestall any claims the U.S. has entered a recession: “If you’re out in the economy, you don’t feel like you’re in a recession. That’s the bottom line. The most important risk out there is inflation. And I think the job market just confirms that,” Daly said.

THE PROBLEM WITH THAT – NYT’s Jeanna Smialek and Jim Tankersley: “America’s job market is remarkably strong, a report on Friday made clear, with unemployment at the lowest rate in half a century, wages rising fast and companies hiring at a breakneck pace. But the good news now could become a problem for President Biden later.”

TO THAT END – Bloomberg’s Benjamin Purvis and Ye Xie: “The wild ride that bond traders have been on is far from over as market expectations for the longer-term path of Federal Reserve monetary policy appear at odds with the central bank’s own view.”

CUTS BOTH WAYS WSJ’s Tom Fairless and Megumi Fujikawa: “From Berlin to Tokyo to Wellington, economic growth is slowing or turning negative across advanced economies, yet labor markets remain historically tight … It is the opposite of the ‘jobless recovery’ diagnosed after the 2008 global financial crisis, when economic growth in the U.S. and parts of Europe picked up but unemployment remained painfully high for years.”

WHERE WILL THOSE JOBS BE? — Bloomberg’s Matthew Boyle: “Weather, war, volatile exchange rates — companies have long blamed factors beyond their control for shrinking profits and slowing sales. The hot new scapegoat? Remote workers.”

P/E — WSJ’s Hannah Miao: “Corporate-earnings expectations are falling. That means the stock market is again at risk of appearing expensive, even after this year’s tumble.”

FRIENDLY FACES — WaPo’s Tory Newmyer: It’s been an ugly summer for the cryptocurrency industry everywhere but on Capitol Hill … The flurry of crypto-friendly legislation represents a dramatic turnaround from what the industry confronted on the Hill a year ago.”

BEER MONEY — Bloomberg’s Kim Bhasin: “Cryptocurrency companies have committed more than $2.4 billion to sports marketing in the past 18 months, according to data compiled by Bloomberg, all in the name of luring more users to their Web3 world—the decentralized technology they’re billing as the next chapter of the internet.”

CASH ONLY Bloomberg’s Yueqi Yang: “Crypto platform Voyager Digital LLC, which filed for bankruptcy protection last month, said it expects to resume user access to the app for cash withdrawals next week … The announcement came after the court approved its proposal to restore access to cash held for customers at Metropolitan Commercial Bank.”

Stephen Hostelley is now director of government relations at Ally. He most recently was deputy chief of staff and legislative director for Rep. Anthony Gonzalez (R-Ohio).

Ukraine said on Sunday that renewed Russian shelling had damaged three radiation sensors and hurt a worker at the Zaporizhzhia power plant, in the second hit in consecutive days on Europe’s largest nuclear facility. — Reuters’ Natalia Zinets

The Crypto and Digital Assets All Party Parliamentary Group said it has begun an inquiry into the UK crypto sector with the aim of producing a report and recommendations to share with the government. — The Block’s Mike Millard


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