G7 leaders gathered for a summit in the Bavarian Alps are seeking a deal to impose a ‘price cap’ on Russian oil as the group works to limit Moscow’s ability to finance its war in Ukraine.
Talks on the idea were expected to continue overnight after starting on Sunday at the luxury resort of Schloss Elmau, where leaders want to enlist a slew of countries beyond the G7 to cap the price paid for Russian oil .
They hope a cap would limit the benefits to the Kremlin war machine from soaring crude prices while cushioning the impact of rising energy prices on Western economies.
The idea has been heavily promoted by the United States and recent comments from German officials suggest Berlin is also considering the idea.
Officials said Mario Draghi, the Italian prime minister, told his fellow G7 leaders that the energy price cap was necessary because “we need to reduce the amount of money going to Russia and get rid of one of the main causes of inflation”.
On Monday, the caps will be debated with a wider group as leaders from Germany, the United States, the United Kingdom, France, Italy, Japan and Canada will be joined by countries “ partners” invited to the summit. These include India, which has become a big buyer of discounted Russian oil since the invasion of Ukraine, as well as Argentina, South Africa, Senegal and India. ‘Indonesia.
Charles Michel, President of the European Council, said the EU was ready to decide with its partners on a price cap, but stressed the need for a “clear vision” and awareness of the possible effects of training. “We want to make sure the goal is to target Russia and not make our lives more difficult and complex,” he said.
A senior German official said “intensive discussions” were underway on how a cap would be implemented and work with Western and Japanese sanctions. “The issues we need to resolve are not trivial, but we are on the right track to reach an agreement,” he said.
In May, the EU agreed to a phased ban on maritime shipments of Russian oil while temporarily allowing crude pipeline deliveries to continue. The US has already banned imports of Russian oil and the UK plans to phase them out by the end of this year.
Energy leaders warn that Russia could drastically cut oil supplies in response to any attempt to impose a price cap or further cut gas exports to Europe.
As G7 leaders met, Russia fired missiles at residential areas of Kyiv for the first time in weeks, damaging an apartment building and a kindergarten in an attack US President Joe Biden called condemned as an “act of barbarism”.
British Prime Minister Boris Johnson recalled on Sunday the need to maintain consensus, warning against the “fatigue” of “populations and politicians”.
In a show of solidarity with Ukraine, its President Volodymyr Zelenskyy was invited to join the summit via video link on Monday.
The economic backdrop to the G7 meeting was shaped by a war that drove up food and energy prices and heightened fears of an impending recession. The blockade of Ukrainian ports has raised concerns about food shortages in developing countries, while Russia’s decision to cut off gas supplies to Europe threatens to cut continent-wide energy.
Host Olaf Scholz, the German Chancellor, said all G7 states were concerned about the “crises we are currently facing”. But he said he was convinced that the G7 would send a “very clear signal of unity and decisive action”.
Leaders are also targeting China. Biden said the G7 had built on an agreement first announced in Cornwall a year ago to offer infrastructure funding to poor countries as an alternative to China’s Belt and Road initiative.
“Collectively, we aim to mobilize nearly $600 billion from the G7 by 2027,” he said. The program now has an official name – the Partnership for Global Infrastructure and Investment – and will focus on funding for health, digital connectivity, gender equality, climate and energy.
He said it would allow communities around the world to “see for themselves the concrete benefits of partnering with democracies”.
Ursula von der Leyen, President of the European Commission, said the EU would mobilize 300 billion euros by 2027. The aim, she said, was “to show the world that democracies, when ‘they work together, provide the best path to results’. .
As part of efforts to increase economic pressure on Russia, Britain, Canada, Japan and the United States have announced moves to ban imports of Russian gold. “We need to defund the Putin regime,” Johnson said.
The idea of an oil price cap comes at a time when the high price of crude means Russia’s revenue from oil exports has not necessarily declined despite Western restrictions on Russian oil imports.
Concerns are growing that attempts to bar ships carrying Russian oil from accessing Western insurance markets later this year could push global oil prices to unprecedented levels. The International Energy Agency warns that this could contribute to the shutdown of more than a quarter of Russian production from before the invasion.
Under the price cap system, Europe would limit the availability of shipping and insurance services that enable the global transportation of Russian oil, mandating that the services would only be available if the price cap was met by the EU. importer. A similar restriction on the availability of US financial services could give the program additional impact.
Scholz stressed that the concept would require broad support around the world. It would also force the EU to change its ban on insuring Russian crude shipments – introduced with the ban on oil imports by sea – which requires all 27 EU states to join.
The UK should join us, as it is home to the Lloyd’s of London insurance market. The EU and UK have already agreed to coordinate on an insurance ban, but London has not finalized its schedule.
Additional reporting by Jasmine Cameron-Chileshe