G7 plans to cap energy prices to limit Russian revenue

By on June 28, 2022 0

G7 members will explore ways to cut energy costs, including through possible caps on oil and gas prices, as leaders pledge to stop Russia profiting from its ‘war of war’. ‘aggression’ against Ukraine and aimed at curbing inflationary pressures.

In a statement to be released today, the G7 will agree to develop solutions that reduce Russia’s hydrocarbon revenues while minimizing the negative impacts of high energy prices, particularly on low-income and intermediate.

According to the document, seen by the Financial Times, leaders will explore the “feasibility” of introducing temporary price caps on energy imports – a reference to US-led push for a cap on the price of oil. Russian oil. A G7 official said earlier that capitals had agreed it was a good idea, but there was “a lot of work” to be done to make it a reality.

G7 leaders said Russia’s war in Ukraine has exacerbated the economic impact of the Covid-19 pandemic, “dragging growth, causing significant increases in the prices of raw materials, energy and food, pushing inflation to levels not seen in decades.”

In their statement, the leaders agreed to “continue to impose serious and immediate economic costs on the regime of President Vladimir Putin” for its “unjustifiable war of aggression against Ukraine”.

The idea of ​​the price cap is driven by fears that Russia could profit from soaring energy prices triggered by its war in Ukraine, despite the restrictions that G7 member states have imposed on Russian energy imports.

In their statement, the leaders said they were “working to ensure that Russia does not exploit its position as an energy producer to profit from its aggression to the detriment of vulnerable countries”.

They also express concern over the burden of rising energy prices and market instability, warning that they are “aggravating inequalities nationally and internationally and threatening our shared prosperity.”

An EU official said the deal included an effort to explore caps on gas prices, not just oil, mirroring a push from Italian Prime Minister Mario Draghi, who has championed the idea for months.

The conclusions underline the deep concern of the leaders of its members regarding the consequences of the war in Ukraine on their economies. They are ready to accept that their ministers urgently assess the feasibility of a price cap.

The G7 agreement pledges to consider a range of approaches to the oil price cap, including options for a “possible complete ban on all services” that allow Russian oil to be transported by sea, to unless its price is equal to or lower than a ceiling to be determined in consultation with international partners.

Officials say the cap could be enforced via limits on the availability of European insurance for Russian oil shipments, as well as US shipping services and finance. But they warn that the scheme is very complex and will require intensive technical work. He could face challenges in the EU where sanctions require the consent of all 27 member states.

“We support the basic structure,” a G7 official said of Russia’s oil price cap. “But the details need to be worked out.”

Another said all G7 states agreed with “the basic idea that we need to reduce Russian oil revenue streams”.

ExxonMobil chief executive Darren Woods told the Financial Times that trying to fix prices in the oil market would be a “complicated challenge”. “It’s not obvious to me how this mechanism would work,” he said. “In oil and gas, markets operate very effectively and efficiently.”

Additional reporting by Tom Wilson in Brussels