G7 Countries Agree to Set Price Cap on Russian Oil

G7 leaders on Friday agreed to impose a price cap on Russian oil to limit the Kremlin’s ability to fund its invasion of Ukraine, CNN reports.

The United States, Canada, Japan, German, France, Italy and the United Kingdom agreed to ban the provision of "services which enable maritime transportation of Russian-origin crude oil and petroleum products globally" above the price cap.

The move could block insurance cover or finance for oil shipments, according to CNN.

The price would be set by a “broad coalition” of nations, G7 leaders said in a statement.

The price cap is set to go into effect along with the European Union’s next batch of sanctions, including a ban on Russian oil transported via waterways, in December.

Russia threatened to retaliate:

Russia already threatened to retaliate against the west by barring oil exports to countries to impose the price cap.

"We will simply not supply oil and petroleum products to such companies or states that impose restrictions, as we will not work non-competitively," Deputy Prime Minister Alexander Novak told reporters.

Novak called the price cap “completely absurd.”

"Such attempts will only destabilize the oil industry, the oil market," he said.

Will it work?

"The price cap is specifically designed to reduce Russian revenues and Russia's ability to fund its war of aggression whilst limiting the impact of Russia ́s war on global energy prices, particularly for low and middle-income countries," the G7 finance ministers said.

But implementing the cap could be complex, according to CNN.

"[We] urge all countries that still seek to import Russian oil and petroleum products to commit to doing so only at prices at or below the price cap," the finance ministers said.

"While we've seen energy prices ease in the United States, energy costs remain a concern for Americans and continue to be elevated globally," US Treasury Secretary Janet Yellen said in a statement. "This price cap is one of the most powerful tools we have to fight inflation and protect workers and businesses in the United States and globally from future price spikes caused by global disruptions."

 

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