The G7 will implement a cap on the price of Russian oil and encourage a “broad coalition” of countries to participate in this initiative intended to deprive Moscow of part of its windfall from the energy sector, according to a statement published on Friday.“The price cap will be set at a level based on a series of technical data and will be decided by the entire coalition before its implementation”write the seven countries in the declaration, assuring that the future prices would be “communicated publicly in a clear and transparent manner”.
The decision, which must be implemented “urgently” according to the G7 declaration, was finalized during a virtual summit of the finance ministers of the seven most industrialized countries (United States, Germany, France, United Kingdom, Canada, Japan).
“Russia benefits economically from the uncertainties linked to the war on the energy markets”German Finance Minister Christian Lindner told reporters after the meeting.“Russia is currently making high profits from the export of raw materials like oil and we want to oppose this resolutely”he argued.
Convince as many countries as possible
“The price cap is specifically designed to reduce Russia’s revenue and its ability to finance its war of aggression, while limiting the impact of Russia’s war on the world”in particular the “low-income countries”, explains the G7 in its statement. Concretely, Russia would sell its oil to these countries at a lower price than the one at which it sells it today, but which would remain higher than the production price, so that it has an economic interest in continuing to sell it to them, and so that it does not cut its deliveries.
The challenge is to rally as many countries as possible because the price cap will only work if all the major buyer countries participate, underline the experts, who point in particular to the role of China and India.
To this end, the G7 “invites all countries to provide input on the design of the price cap and to implement this important measure”in order to establish “a broad coalition” to maximize the effect of the measure.
The leaders of the G7 countries, at the instigation of Washington, launched work at the end of June aimed at developing the complex mechanisms of this cap, which should be based on a ban on insurers and reinsurers from covering the maritime transport of Russian oil.
Not to Moscow’s taste
The introduction of a ceiling on the selling price of Russian oil, a measure envisaged to punish Moscow for its offensive in Ukraine, “destabilize” the black gold market, the Kremlin warned on Friday. “We can say one thing with certainty: the adoption of such a decision would lead to a significant destabilization of the oil markets”Kremlin spokesman Dmitry Peskov told reporters.
This warning comes as several countries have been calling for weeks to limit the sale price of Russian oil to undermine the windfall allowing Moscow to finance, in particular, its military intervention in Ukraine.
Russian Deputy Prime Minister for Energy Affairs Alexander Novak warned on Thursday that Russia would no longer sell oil to price-cap countries.
“As far as price restrictions are concerned, (…) we will simply no longer deliver oil or petroleum products to companies or countries that impose such restrictions”, he warned, quoted by Russian news agencies. A cap would be “completely absurd” and would cause a destabilization of the market whose “European and American consumers would be the first to pay the price“, he estimated.
Since the beginning of the Russian offensive against Ukraine at the end of February, Western countries have imposed several rounds of sanctions against Moscow.
The European Union adopted in June a gradual embargo on Russian oil, providing in particular for the cessation of crude oil imports by boat within six months.