G-7 Leaders Nearing Price Cap On Russian Oil That’s Funding Putin’s War Chest

Breaking Business G-7 Leaders Nearing Price Cap On Russian Oil That’s Funding Putin’s War Chest Robert Hart Forbes Staff I cover breaking news. New! Follow this author to improve your content experience. Got it! Jun 27, 2022, 06:25am EDT | Share to Facebook Share to Twitter Share to Linkedin Topline Leaders of Group of Seven nations are nearing an agreement to set a price cap on Russian oil on Monday, according to multiple news reports, a contentious issue as they debate new measures to stave Putin’s war chest while mitigating spiraling inflation, soaring energy prices and an impending global food crisis.

U. S. President Joe Biden with other G7 leaders.

ASSOCIATED PRESS Key Facts Leaders of the G-7 —a group of the world’s seven largest economies which includes the U. S. , the U.

K. , Canada, France, Germany, Italy and Japan—are expected to announce an agreement in principle to imposing a price cap on Russian oil, according to multiple news reports. Crucial details of the proposed price cap—which would set an upper limit on how much revenue Russia could generate from its oil—remain unclear, including how it would work and how long it will take for leaders to agree and subsequently implement a specific plan.

Details will reportedly be resolved by G-7 nations’ finance ministers in coming weeks and months. The agreement comes at the end of a three-day G-7 summit in the German Alps, where discussion has been dominated by the wider impact of Russia’s war in Ukraine. G-7 leaders are also expected to announce a suite of new measures against Moscow, including higher tariffs on Russian goods and new sanctions on officials and organizations supporting the war.

The group is also set to announce new support for Ukraine, including the U. S. providing advanced military hardware and artillery support.

Key Background Energy, notably oil and gas, has been a major source of revenue for Russia and a key source of financing for its war in Ukraine. While an obvious target for economic sanctions, it is a major global exporter and doing so could have a significant impact on energy prices, which have soared since the war began. Many countries—including the U.

S. , U. K.

and the EU—have targeted Russian oil and gas exports with sanctions, though Moscow has still managed to sell elsewhere , including to China and India, even benefiting from higher prices on the global market. The U. S.

has lobbied for more comprehensive measures, though the issue has proven contentious among world leaders. Capping Russian oil prices has proven divisive, with Germany in particular questioning the practicalities of a price cap. What We Don’t Know Exactly how a price cap would work.

In theory, a price cap would enable leaders to cut off a key financing stream for Russia’s war in Ukraine while also addressing soaring inflation and energy prices, though any measures would need to be squared with existing sanctions and secure sufficient buy-in from countries around the world. Current proposals hinge on the fact that almost all oil tankers insurance is arranged through a single organization, the International Group of Protection and Indemnity Clubs. The cap would mean the London-based organization could only insure services that observe the price cap, which would otherwise be subject to sanctions.

Further Reading Where are Russia’s barrels of oil going? (Washington Post) Russia sanctions: Can the world cope without its oil and gas? (BBC) Follow me on Twitter or LinkedIn . Send me a secure tip . Robert Hart Editorial Standards Print Reprints & Permissions.