The finance ministers of the seven leading industrial nations (G7) want to push through a price cap on Russian oil. In a joint statement available to the German Press Agency on Friday, they also called on all countries that import Russian oil to follow this measure. “We are aiming for a broad coalition to maximize effectiveness,” the paper said.
In essence, the aim is to force Russia to sell oil to large buyers such as India at a significantly lower price in the future. The hope is that this will ease the global oil markets and cushion the effects of the Ukraine war on energy prices. At the same time, Russia would no longer be able to benefit from rising oil prices and thus fill its war chest.
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The sea transport of crude oil and petroleum products of Russian origin should only be possible worldwide if the oil was bought below a certain price. The price cap could work if the West linked important services such as insurance for oil transport to compliance with the regulation. These are largely in Western hands.
The G7 themselves – Germany, France, Italy, Great Britain, the USA, Canada and Japan – undertook with the declaration to implement the price cap in their own countries quickly.
In the EU, where an oil embargo against Russia has already been decided, all member states should agree first. The aim is to implement it within the time frame of the sixth EU sanctions package, it said.
Insider circles had previously said that the G7 would vote for an upper limit without setting the exact amount. After that, attempts will be made to find other partners for the project. Federal Finance Minister Christian Lindner wants to comment on the subject in the afternoon.
Russia warns of retaliatory measures in the event of a price cap on its oil exports. “Companies that impose price caps will not be among the recipients of Russian oil,” Presidential Office spokesman Dmitry Peskov said on Friday, confirming statements by Deputy Prime Minister Alexander Novak on Thursday. “One thing can be said with confidence: Such a decision would result in significant destabilization of oil markets.”
According to US ideas, financial services, insurance and the transport of oil cargo are to be combined. A cargo company or importer should then only receive these services if they adhere to an upper limit for Russian oil that has yet to be determined.
Ship insurance is primarily negotiated in the financial center of London. According to analysts, however, alternatives can be found, so that the measures taken by the West could prove ineffective in the end.
Even G7 officials concede that ideally the major oil buyers China and India should be on board. However, this is not considered overly likely.
“We want to get the price cap across the finish line,” British Treasury Secretary Nadhim Zahawi said at an event in Washington this week, a day after consultations with US Treasury Secretary Janet Yellen, who is the driving force behind the plans.
Although the volume of Russian oil exports has recently declined, revenues from them increased by $700 million in June compared to May.
EU Commission President Ursula von der Leyen also wants the EU to pay less for Russian gas in view of the drastic rise in energy prices. “I am firmly convinced that it is now time for a price cap on Russian pipeline gas to Europe,” von der Leyen said on Friday at a meeting of the Union parliamentary group leaders in Murnau, Upper Bavaria.
According to von der Leyen, such a gas price cap can be proposed at European level.
The EU Commission had previously advised against a price cap on the wholesale market within the EU as an emergency measure in a draft, as this could distort supply and demand. Von der Leyen, on the other hand, is calling for a cap on gas import prices via pipelines from Russia.
This could also lead to lower prices in the EU. However, there is a risk that Russia will stop supplying gas at the lower price.
According to ex-President Dmitry Medvedev, Russia will stop gas supplies to Europe if the EU imposes a price cap on Russian gas. “There simply won’t be any Russian gas in Europe,” the deputy chief of the Russian Security Council wrote in the messaging app Telegram.
Von der Leyen emphasized that the top priority is saving energy. “There is not enough energy globally. Putin would rather burn off the gas than deliver it to Europe or other regions as per the contract. So: save energy, and save wisely, especially at peak times, so that we don’t need gas then,” she said.
Secondly, one must ensure “that we can reinvest the excessive profits that the electricity producers have today, which they never expected and which they also cannot reinvest so quickly that we skim off some of them”.
This was intended to support low-income and vulnerable companies in a targeted manner during the crisis. “The skimming of profits as an emergency tool in the short term in times of crisis, there is also a legal basis for this at European level,” she said.