G-7 leaders near Russian oil price cap funding Putin’s war chest

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Topline

Leaders of the Group of Seven countries are close to reaching an agreement to set a price cap on Russian oil on Monday, according to multiple reports, a controversial issue as they debate new measures to avoid the war chest of Putin while mitigating spiraling inflation, soaring energy prices and a looming global food crisis.

Highlights

Leaders of the G-7, a group of the world’s seven largest economies that includes the United States, United Kingdom, Canada, France, Germany, Italy and Japan, are expected to announce a principle to impose a price cap on Russian oil, according to several reports.

Crucial details of the proposed price cap – which would set an upper limit on the revenue Russia could generate from its oil – remain unclear, including how it will work and how long it will take leaders to agree and implement. a specific plan.

The details will apparently be ironed out by G-7 finance ministers in the weeks and months to come.

The deal comes at the end of a three-day G-7 summit in the German Alps, where talks were dominated by the wider impact of Russia’s war in Ukraine.

G-7 leaders are also expected to announce a series of new measures against Moscow, including higher tariffs on Russian products and new sanctions against officials and organizations supporting the war.

The group is also set to announce new support for Ukraine, including the United States providing advanced military equipment and artillery support.

Key context

Energy, especially oil and gas, has been a major source of income for Russia and a key source of funding for its war in Ukraine. Although it is an obvious target for economic sanctions, it is a major global exporter and that could have a significant impact on energy prices, which have soared since the start of the war. Many countries, including the US, UK and EU, have targeted Russian oil and gas exports with sanctions, although Moscow has still managed to sell elsewhere, including to China and to India, even benefiting from higher prices on the world market. The United States has pushed for more comprehensive measures, although the issue has proven contentious among world leaders. The Russian oil price cap has proven to be 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 allow leaders to cut off a key funding stream for Russia’s war in Ukraine while tackling soaring inflation and energy prices, though any measure must be reconciled with existing sanctions and ensure sufficient buy-in from neighboring countries. the world. The current proposals are based on the fact that almost all oil tanker insurance is underwritten through a single organization, the International Group of Protection and Indemnity Clubs. The cap would mean the London-based organization could only deliver services that meet the price cap, which would otherwise be subject to sanctions.

Further reading

Where are Russian oil barrels going? (Washington Post)

Sanctions against Russia: can the world do without its oil and gas? (BBC)

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