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G7 ministers push ahead with Russian oil price cap, details slim

Sept 2 (Reuters) – Group of Seven finance ministers agreed on Friday to impose a cap on Russian oil prices aimed at cutting Moscow’s war revenue in Ukraine while keeping oil flowing to avoid surges in prices, but Russia has pledged to suspend oil sales to countries imposing this.

Ministers from wealthy G7 democracies confirmed their commitment to forming a buyers’ cartel after a virtual meeting. They said, however, that key details, including the level per barrel of the price cap, would be determined later “based on a range of technical inputs” to be agreed by the coalition of countries implementing it.

“Today we confirm our common political intention to finalize and implement a comprehensive ban on services that enable the maritime transport of crude oil and petroleum products of Russian origin around the world,” the G7 ministers said. .

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The provision of Western-dominated shipping services, including insurance and finance, would only be permitted if Russian oil cargoes are purchased at or below the price level “determined by the broad coalition of adhering countries and implementing the price cap”.

The G7 is made up of Britain, Canada, France, Germany, Italy, Japan and the United States.

A senior US Treasury official told reporters that the coalition would set a specific dollar price limit for Russian crude and two others for petroleum products, not global market price discounts. The cap would be reviewed as needed.

G7 ministers said they would work to finalize details through their own national processes in time to be launched by December 5, when new European Union sanctions initiate an import ban of Russian oil in the block.

“This price cap on Russian oil exports is designed to reduce Putin’s income, shutting down an important source of funding for the war of aggression,” said German Finance Minister Christian Lindner, the current Finance Chairman of the G7. “At the same time, we want to curb the rise in global energy prices. This will minimize inflation globally.”


The Kremlin responded to the G7 statement by saying it would stop selling oil to countries enforcing the price cap, saying it would destabilize global oil markets.

“We simply won’t cooperate with them on non-market principles,” Kremlin spokesman Dmitry Peskov told reporters. Read more

A view shows the Kozmino crude oil terminal on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel

Nonetheless, US Treasury Secretary Janet Yellen said Russia would still have an economic incentive to sell oil at or near the price cap, because otherwise it would have to shut down production which would be difficult to restart. China and India would also seek to buy oil at the capped price, she added.

French Finance Minister Bruno Le Maire injected a dose of reality, telling his G7 counterparts that more work was needed to work out technical details, persuade a critical mass of importers to join the plan and preserve the European unity on the subject, his office said in a statement. statement.

“We have received positive signals from other countries, but no firm commitments yet,” a senior G7 source said of efforts to recruit other countries into the coalition. “We wanted to send a signal of unity to Russia and also to countries like China.”

The G7 announcement had little effect on benchmark crude prices, which rose ahead of an OPEC+ discussion of production cuts on Monday amid weaker demand.

Ministers said they would work to finalize the details, through their own national processes, with the aim of aligning them with the start of European Union sanctions that will ban imports of Russian oil into the bloc. from December.

Enforcement of the cap would depend heavily on refusing London-negotiated marine insurance, which covers around 95% of the world’s tanker fleet, and financing cargoes priced above the cap. But some analysts say alternatives could be found to circumvent it and market forces could render it ineffective Read More

G7 ministers said they would seek to limit circumvention through “a record-keeping and attestation model covering all types of relevant contracts” which aims for consistent application across jurisdictions.

Despite Russia’s lower oil export volumes, its export revenue in June was up $700 million from May due to prices pushed up by its war in Ukraine, the government said. International Energy Agency last month.


The US Treasury raised concerns that the EU embargo could trigger a rush for alternative supplies, pushing global crude prices up to $140 a barrel, and it promoted the cap prices as a way to keep Russian crude in circulation.

Russian oil prices rose ahead of the EU embargo, with Urals crude trading at a discount of $18-25 a barrel to benchmark Brent crude, from a discount of $30-25 a barrel. $40 earlier this year. Read more

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Additional reporting by Jan Strupczewski, Matthias Williams, Steve Scherer, William James, Leigh Thomas, Timothy Gardner, Daphne Psaledakis and Rami Ayyub; Editing by Raju Gopalakrishnan, Chizu Nomiyama and Jonathan Oatis

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