Kremlin says G7's price cap must be agreed bilaterally: press
G7 leaders have agreed to consider a price cap on Russian crude imports, though the Kremlin insists any move to fix either oil or gas prices will first need to be agreed with Russian suppliers, TASS reported June 28.
At the G7's annual summit in Germany's Bavarian Alps, leaders discussed the oil price cap as a means of restricting hydrocarbon revenues being used to fund Moscow's war in Ukraine. The policy may also help limit food and energy inflation in G7 economies, as market prices continue to climb upward, reflecting increased demand for non-Russian fuel sources and disruption at key global gas producers.
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The price cap could be enforced by lifting sanctions on support for the shipment of Russian oil, such as insurance, but threatening sanctions to those buyers that do not comply with the measure.
The G7 host nation Germany has accused the Kremlin of seeking economic warfare, after a massive drop-off in gas flows via Nord Stream threatened disruption to its internal gas market, as well as numerous other EU countries. Russian president Vladimir Putin made a similar claim in response to Western sanctions on Russian trade, arguing it amounted to declaring an "economic war".
The introduction of a price cap would, therefore, raise the temperature further. It is a signal Russia's foes are losing patience as the hostilities enter their fifth month, and are prepared to take increasingly belligerent stances on Russian energy flows, with the knowledge the Russian economy will suffer from decreased G7 revenues.
The G7 consists of six western governments (Canada, France, Germany, Italy, the UK and the US), as well as Japan and the EU as a "non-enumerated" member. As such, the price cap would lack the backing of either China or India. With both countries officially neutral to the Ukraine invasion, this could risk diverting more Russian energy supplies to Chinese or Indian customers. Tamas Varga from oil broker PVM told Reuters Putin could consider reducing energy exports to G7 countries in retaliation. Some G7 nations may feel adequately protected by long-term energy sales agreements, particularly given efforts in recent months to strengthen alternative gas import channels.