G7 finance chiefs agree on Russian oil price

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Group of Seven finance ministers agreed on Friday to impose a cap on Russian oil prices aimed at reducing Moscow’s war revenue in Ukraine while maintaining the flow of crude to avoid price spikes, but their statement omitted key details from the plan.

Ministers from the wealthy industrial democracies club confirmed their commitment to the plan after a virtual meeting. They said, however, that 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. .

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

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.

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

The ministers said they would seek a broader coalition of oil-importing countries to buy Russian crude and petroleum products only at or below the ceiling price, and invite their input into the plan.

Some G7 officials have expressed concern that the price cap would not succeed without the participation of major importers such as China and India, which have sharply increased their purchases of Russian crude since Moscow launched its invasion. in February. But others said China and India had expressed interest in buying Russian oil at an even lower price, in line with the cap.

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 analysts say alternatives can be found to circumvent the cap and market forces could render it ineffective

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

The G7 finance ministers’ statement follows their leaders’ decision in June to explore the cap, a decision Moscow says it will not respect and can thwart by shipping oil to states that do not. not the price cap.

PRICE CONCERNS

The US Treasury has raised concerns that the EU embargo could trigger a rush for alternative supplies, pushing global crude prices up to $140 a barrel, and it is promoting capping prices since May 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.

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