G7 backs plan for Russian oil price cap


3 minutes


EU deal seen as a barrier, with doubts about whether India and Turkey will join

EU deal seen as a barrier, with doubts about whether India and Turkey will join

Moscow petrol station owned by Russian energy giant Gazprom shown Thursday

Photo credit: AFP

The seven industrialized nations are poised to agree to introduce price ceilings on global purchases of Russian oil. With this, the US hopes to ease pressure on the energy market and reduce Moscow’s overall revenues.

G7 finance ministers are expected to meet on Friday to formally endorse the plan, according to two people familiar with the matter. Part of a broader effort to punish Russia for a military aggression in Ukraine, the G-7 plan will allow buyers of Russian oil to buy essential services such as tanker financing and insurance at capped prices. Allows you to continue receiving

Talks at the G7 are progressing well, one of the people said, and an upcoming joint statement will provide a relatively clear picture of the price range for Russia’s oil purchase cap and the date when the measures may begin. It will be detailed.

Oil prices fell slightly on the news as traders grappled with the possibility of such a regime being imposed and the implications it might have.

Once G7 support is formally announced, diplomats will have to convince European Union member states to amend the sixth round of sanctions against Russia over its invasion of Ukraine. The package, which would ban Russian oil purchases from December 5, included a ban on third-country use of the bloc’s companies for oil-related insurance and financial services.

But it remains unclear how effective the price cap regime will be, especially since some of Russia’s biggest buyers have not agreed to participate. They are reluctant to formally participate in the cap system.

U.S. Undersecretary of the Treasury Adiemo said during a visit to India last month that the coalition to cap Russia’s oil prices had expanded and included many countries, but did not name them.

It will also not be easy to gain the full support of the EU. Hungary, which maintains close ties with Russia, postponed an agreement on the original sanctions package for several weeks as the bloc was trying to reach a deal targeting Russia’s energy sector. Budapest has said it will oppose capping oil prices, suggesting a nasty political struggle could erupt again.

Russia said on Friday it will not sell oil to countries that impose caps on their own oil prices. “We will not interact with them on the basis of these non-market principles,” Kremlin spokesman Dmitry Peskov told reporters on a conference call, adding that Russian oil would find alternative markets.

The United States and its allies have been grappling with how best to impose sanctions on Russia after its aggression rocked energy markets and sent oil prices soaring. The G-7, which includes Germany, the UK, France, Italy, Japan and Canada, announced earlier this year that it would reduce Russia’s dependence on energy “by phasing out or banning imports of Russian oil.” promised.

G-7 leaders announced they would consider a price cap plan at their June summit in Ellmau, Germany. However, German Chancellor Olaf Scholz has argued that for the price cap to work properly it must be introduced globally and supported by multiple countries, not just the G-7 countries. Support for large buyers of Russian oil, such as India and Turkey, is seen as particularly important.

US officials argue that the price cap could work because many buyers can leverage the system in negotiating contracts with Moscow without having to formally join the coalition.

Another important factor is at what level the price cap will be set. However, the final level will depend in part on world oil prices at the time it takes effect.

White House press secretary Carine Jean-Pierre said Thursday that if the measure is adopted, it would “push Russian oil prices down, softening the impact of Putin’s war”, which would cut President Vladimir Putin’s oil revenues across the board. said to reduce it.

©2022 Bloomberg LP

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