The finance ministers of the Group of Seven major nations — the United States, Japan, Canada, Germany, France, Italy and the United Kingdom — said they would ban the provision of “services that allow the worldwide shipping of crude oil and petroleum products of Russian origin.” Above the price ceiling. This can prevent insurance coverage or the financing of oil shipments.
In a joint statement, they said the maximum price would be set by a “broad coalition” of countries. It will come into force alongside the next set of EU sanctions, which include a ban on imports of seaborne Russian oil starting in early December.
Russia had already threatened to retaliate by banning oil exports to countries with a price cap.
“We will not simply supply oil and petroleum products to such companies or countries that impose restrictions, because we will not operate uncompetitively,” Deputy Prime Minister Alexander Novak told reporters Thursday, according to the state news agency TASS.
“The price cap is specifically designed to reduce Russian revenue and Russia’s ability to finance its war of aggression while limiting the impact of Russia’s war on global energy prices, especially for low- and middle-income countries,” the G7 finance ministers said.
But the procedure still needs to be worked out and it will be very difficult to manage. The price at which Russian oil will be capped has yet to be fragmented. It will also need broader international support to be effective.
“What China and India are going to do should be a patriotic decision for them,” a senior US Treasury official told reporters on Friday.
The official added that if the cap forces Russia to make cheaper deals with trading partners by capping the price at which they can sell their products, it will still achieve its goals.
TASS reported that Novak described the proposals to impose restrictions as “totally absurd” and said they could destroy the global oil market.
“Such attempts will only lead to destabilization of the oil industry and the oil market,” he said.
Russia can offer alternative insurance for its oil shipments. But the US Treasury official noted that it would be more expensive, increasing incentives for buyers to sign up for the price cap scheme.
Flows of crude oil and other oil products to the United States, the United Kingdom, the European Union, Japan and South Korea have fallen by about 2.2 million barrels per day since the start of the war in Ukraine, according to the International Energy Agency.
– Chris Liakos, Anna Cuban and Manvina Suri contributed to this report.