G7 finance ministers on Friday pledged to “urgently” introduce a price cap on Russian oil imports in a bid to cut off a key source of funding for the war in Ukraine.
The G7 said it was working on a “broad coalition” to support the measure, but France urged caution, saying a “final” decision could only be made after all 27 EU members gave their consent.
“Russia is profiting economically from the war-induced uncertainty in the energy markets and is making huge profits from oil exports and we want to resolutely counter that.”said German Finance Minister Christian Lindner at a press conference.
The purpose of the price cap on oil exports is to “stop a major source of war financing and stem the rise in global energy prices”.he added.
Ahead of Friday’s decision, Kremlin spokesman Dmitry Peskov sent a clear warning: the adoption of a price cap “will lead to significant destabilization of oil markets,” he said.
Moscow “simply will not supply oil and petroleum products to companies or states that enforce the restrictions,” Russian Deputy Prime Minister Alexander Novak warned on Thursday, according to Russian news agencies.
“Interference in the market mechanisms of such an important industry will only destabilize the oil industry. And for this, European and American consumers will be the first to pay,” he underlined.
“Powerful Tools”
At a summit in June, G7 leaders agreed to work on implementing the cap on oil sales. The G7 finance ministers said they would “work urgently to finalize and implement” the long-considered measure, without specifying the level of the ceiling.
The price cap is “one of the most powerful tools we have to fight inflation and protect workers and businesses in the United States,” US Treasury Secretary Janet Yellen said in a statement.
However, the French Ministry of Finance said that technical work on the price ceiling was still “ongoing”. “It is clear that no final decision can be made until we have consulted all 27 Member States of the European Union and obtained the unanimous support,” they said.
“We support all measures that reduce the income Russia earns from the sale of oil,” French Finance Minister Bruno Le Maire added.
EU Commissioner Paolo Gentiloni said: the G7 aims for an agreement by December 5 for crude oil and February 5 for petroleum products.
“Broad Coalition”
The G7 also expressed an ambition to extend the measure beyond the group, saying it was trying to form a “broad coalition” in support of the oil price ceiling to “maximize” the measure’s effectiveness.
The ministers called on “all countries that still want to import Russian oil and petroleum products to commit themselves to do so only at prices equal to or below the price cap”.
Discussion to get as many countries as possible to join this measure is expected to be a key topic at the G20 summit in Bali on November 15-16..
The initial cap should be set “at a level based on a range of technical inputs”, the G7 ministers said, adding that its effectiveness would be “closely monitored”.
However, analysts warned that the cap could spark yet another price hike. This move would introduce new risks to the oil market by “potentially disrupting Russia’s energy supply,” Capital Economics analyst Liam Perch said in June. “This could drive up global energy prices even further.”
“The cap could also be effective in reducing the Russian government’s tax revenues,” he explained, speculating that a cap of just under €80 a barrel “could push the Russian budget into a deficit.”
Source: El heraldo
