Finance ministers from the G7 group of countries — the United States, Japan, Canada, Germany, France, Italy and the United Kingdom — said they would ban the provision of “services which enable maritime transportation of Russian-origin crude oil and petroleum products globally” above the price cap. That could block insurance cover or finance for oil shipments.
The maximum price would be set by “a broad coalition” of countries, they said in a joint statement. It would take effect alongside the European Union’s next batch of sanctions, which include a ban on seaborne imports of Russian oil starting in December.
Russia had already threatened to retaliate by banning oil exports to countries that implement a 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 Thursday, according to state news agency TASS.
“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 the measure still needs work and will be extremely complex to manage. How, when and by how much the price of Russian oil could be capped remains to be seen. It would also need wider international support to be effective.
“[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.
Since the beginning of July, oil prices have fallen roughly 18% in anticipation that recession will reduce demand, but they’re still about 20% higher than they were one year ago.
“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.”
Novak has 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.
Flows of crude oil and other oil products to the United States, United Kingdom, European Union, Japan and South Korea have dropped by nearly 2.2 million barrels per day since the start of the war in Ukraine, according to the International Energy Agency.
Russian state energy giant Gazprom said that the cut in deliveries through the Nord Stream 1 pipeline was due to a planned shutdown for a few days for maintenance work. It is supposed to reopen on Saturday.
— Chris Liakos, Anna Cooban and Manveena Suri contributed to this report.