G7 Agrees On Oil Price Cap Against Russia

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…EU faces Russia’s threat to dry up the gas pipelines

The G7 group agreed last Friday to finalize and implement a cap on Russian oil. The capping, it is hoped, would reduce Vladimir Putin’s oil revenues and impact on his ability to prosecute the war in Ukraine.

Finance ministers of The G7 who met last weekend confirmed they would finalize and implement “a comprehensive prohibition of services which enable maritime transportation of Russian-origin and petroleum products globally – the provision of such services would only be allowed if the oil and petroleum products are purchased at or below a price (‘the cap’) determined by the broad coalition of countries adhering to and implementing the price cap,” a report said.

Meanwhile, The G7 said they invited all countries to provide input on the design of the cap, looking to have “a broad coalition in order to maximize effectiveness and urge all countries that still seek to import Russian oil and petroleum products to commit to doing so only at prices at or below the price cap.”

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The largest buyers of Russian oil since the US led coalition commenced boycott of their gas remain and India. Both countries, reports are crucial to a successful implementation of a cap. But it’s unclear whether one or both countries would join G7’s initiative.

“By committing to finalize and implement a cap, the G7 will significantly reduce Russia’s main source of funding for its illegal war, while maintaining supplies to global energy markets by keeping Russian oil flowing at lower prices,” U.S. Secretary of the Treasury Janet Yellen said.

“I look forward to working with our G7 allies – as well as new coalition partners – as we move quickly to finalize the implementation of the cap in the weeks to come,” she added.

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Meanwhile, Russia said it would not be selling its oil to countries that choose to adhere to the cap. “Companies that impose a price cap will not be among the recipients of Russian oil,” Kremlin spokesman Dmitry Peskov said last Friday, reiterating a similar comment from Russian deputy prime minister, Alexander Novak from Thursday. 

Russia also warned Europe on Friday it could halt natural gas flows if the EU decides to impose a cap on Russian pipeline gas, as suggested by European Commission President Ursula von der Leyen.

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