Price Cap on Russian Oil Wins Backing of G7 Ministers

The proposal still faces considerable obstacles.

The European Union will have to amend a package of sanctions that is set to take effect on Dec. 5 to incorporate the price cap; that will require the unanimous agreement of all 27 member states.

Biden administration officials are growing increasingly confident that they will be able to galvanize an international effort to impose the price cap, in part because of the progress at the G7. But they say bringing all member countries of the European Union on board for the plan will be more difficult. The G7 had already agreed to explore the concept of a price cap at a leaders’ summit in the German Alps in June. But European countries like Hungary — which previously pushed for the oil they buy from Russia via pipeline to be exempted from Europe’s import ban — have not yet agreed on such a plan.

Energy analysts have been skeptical that a price cap can corral oil prices. The maritime insurance industry, which would be responsible for making sure that buyers and sellers were honoring the price cap, has warned that insurers lack the capacity to police the transactions.

In addition, while the United States and Europe have moved to cut themselves off from Russian oil, nations such as China and India have been buying it at heavily discounted prices. That has allowed Mr. Putin to support his economy despite global sanctions that have been imposed on its central bank, financial sector and military industry.

The United States has been working to broaden the coalition beyond the Group of 7, actively courting the support of nations such as South Korea and India. Last month, Ms. Yellen’s deputy, Wally Adeyemo, met with counterparts in India to discuss global energy security and promote the price cap concept.

Biden administration officials hope that if a broad enough coalition agrees to the price cap, it would give nations that do not want to officially join more bargaining power to negotiate lower prices with Russia.

Article source: https://www.nytimes.com/2022/09/02/business/economy/g7-russian-oil-price-cap.html