Finance ministers from the G7 group of countries – the United States, Japan, Canada, Germany, France, Italy and the United Kingdom – have said they will ban the provision of “services that enable maritime transport of crude oil and petroleum products of Russian origin in the world”. ” above the ceiling price. This could block insurance coverage or funding for oil shipments.
The maximum price would be set by “a broad coalition” of countries, they said in a joint statement. It would come into force alongside the next batch of European Union sanctions, which include a ban on maritime imports of Russian oil from early December.
Russia had previously threatened to retaliate by banning oil exports to countries that apply price caps.
“We simply won’t supply oil and petroleum products to those companies or states that impose restrictions, because we won’t work in an uncompetitive way,” Deputy Prime Minister Alexander Novak told reporters on Thursday, according to the report. state news agency TASS.
The Biden administration has been pushing for months for governments to introduce price caps. The West has already sanctioned many Russian energy exports, but Moscow has continued to earn billions of dollars a month by diverting oil to countries like China and India.
“The price cap is specifically designed to reduce Russian revenues and Russia’s ability to finance its war of aggression while limiting the impact of the Russian war on global energy prices, especially for countries low- and middle-income,” the G7 finance ministers said.
But the measure still requires work and will be extremely complex to manage. The price at which Russian oil will be capped has yet to be specified. It would also need wider international support to be effective.
“What China and India do will have to be a national decision for them,” a senior US Treasury Department official said on a call with reporters on Friday.
But if the cap forces Russia to strike cheaper deals with its trading partners by capping the price at which they can sell their products, it will still achieve its goals, the official added.
Novak called the proposals to impose restrictions “completely absurd” and said they could destroy the global oil market, TASS reported.
“Such attempts will only destabilize the oil industry, the oil market,” he said.
Russia could offer alternative insurance for its oil shipments. But the US Treasury official noted that they would be more expensive, which would encourage buyers to join the price cap system.
Flows of crude oil and other petroleum products to the United States, United Kingdom, European Union, Japan and South Korea have fallen nearly 2.2 million barrels per day since the start of the war in Ukraine, according to the International Energy Agency.
But two-thirds of that drop was redirected to other markets, helping to bail out Moscow’s coffers. Export earnings in July were around $19 billion, the IEA said.
Russia’s control of large swathes of the world’s energy supply remains a major problem challenge six months after its invasion of Ukraine. This week, Russia temporarily halted natural gas deliveries to the region through a vital pipeline and cut off all supplies from a French utility, compounding problems that have driven European inflation to a record 9% .
On Friday, shortly after the G7 announcement, Russian energy giant Gazprom said it would not resume deliveries through the Nord Stream 1 pipeline on Saturday as planned. The company cited an oil leak and did not say when deliveries might resume.
— Chris Liakos, Anna Cooban and Manveena Suri contributed to this report.