Following a virtual meeting on Friday 2 September, the Finance Ministers of the G7 countries (Germany, Canada, the United States, France, Italy, Japan, and the United Kingdom) pledged to “urgently work” to establish a price cap on Russian oil in a joint statement.
“We confirm today our joint political intention to finalise and implement a comprehensive prohibition of services which enable maritime transportation of Russian-origin crude oil and petroleum products globally - the provision of such services would only be allowed if the oil and petroleum products are purchased at or below a price (cap)”, the statement said.
This price cap will be set at a level based on “a range of technical inputs” and will be determined by the entire coalition of countries participating in this measure prior to its implementation in each jurisdiction. Its level can then be reviewed, if necessary, on the basis of monitoring the effectiveness and impact of the cap.
Through this measure, the G7 countries intend to reduce Russian revenues and Russia’s ability to finance its war of aggression against Ukraine, while limiting the impact of this war on global energy prices, particularly for low and middle income countries.
In their view, this measure can indeed “be particularly beneficial” for these countries, which are especially suffering from high energy and food prices.
The statement also stresses that G7 countries will establish in parallel “targeted mitigation mechanisms” to ensure that the most vulnerable and affected countries retain access to energy markets, including those of Russia.
It also calls on “all countries” to contribute to the design of the price cap and to implement the measure in order to maximise its effectiveness.
The EU seeks unanimity
Attending the meeting, European Commissioner for Economy Paolo Gentiloni said that the G7 Finance statement reinforces the sixth package of sanctions against Russia that the EU adopted in June (see EUROPE 12965/9), by extending the ban on Russian oil imports to G7 countries while allowing its trade to continue worldwide, but at a lower price.
He assured that the Commission would play its part in seeking the unanimity of the 27 Member States in order to apply the price cap on imported Russian oil in the EU in accordance with the timetable set out in the sixth sanctions package, i.e. 5 December 2022 for crude oil and 5 February 2023 for oil products.
Russia ready to suspend deliveries
On the Russian side, Russia’s Deputy Prime Minister for Energy, Alexander Novak, warned that his country “will simply not deliver any more oil or oil products to companies or countries that impose such restrictions”.
He called the idea of a cap “completely absurd” and said it would destabilise the market and “European and American consumers would be the first to pay the price”, according to AFP.
The US State Department’s sanctions coordinator, James O’Brien, said that “Russia needs to keep its energy machine running and needs the money (from its energy exports)”.
Moscow has also said that sanctions against Russia threaten the operation of Nord Stream 1 by causing a shortage of spare parts.
According to Kremlin spokesman Dmitry Peskov, the operation of the entire system is at risk, as there are no reserves to replace the only working turbine if necessary.
This declaration was made on the day the maintenance work on Nord Stream 1 was completed. Work that started on 31 August and caused a total halt to Russian gas deliveries to Europe via this pipeline (see EUROPE 13011/26).
While some feared that the outage would be prolonged, shipping orders issued by the operator Nord Stream indicate that gas flows are expected to resume at the pre-maintenance level of 20% starting at 2am.
Link to the G7 press release: https://aeur.eu/f/2ww (Original version in French by Damien Genicot with Mathieu Bion)