G7 yet to reach agreement on Russian oil price cap

The G7 group of major economies is yet to reach agreement on the ambitious idea of a price cap on Russian oil exports to third countries, and said today that talks on the matter will continue.

In a statement issued to mark the end of a two-day summit in Germany, the group said it is considering "a range of approaches, including options for a possible comprehensive prohibition of all services, which enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultation with international partners".

The G7 said ministers will continue discussions on this "urgently" with third countries, the private sector and energy suppliers. The US Treasury Department separately said it "will work expeditiously" on the proposal.

The idea behind the price cap is to enable third-country market participants to buy and transport Russian crude without any hindrance from US, EU and UK sanctions, so long as they agree to only pay a fixed price well below the market rate. The goal is to ensure Russian oil supply remains available but at a reduced price, to cut Moscow's export earnings.

Such a move would be a first, and to be a success would realistically require the participation of large buyers of Russian oil like China and India, both of which have increased purchases since G7 members and the EU rolled out plans to partially or fully limit their own oil imports from Russia. Although Russian oil production fell sharply in April, it has since rebounded and deputy prime minister Alexander Novak has projected this will continue in July to a level near that achieved before Moscow's invasion of Ukraine. Russian crude exports have held firm above 5mn b/d in recent months.

The US and UK had pushed for the price-cap proposal to be adopted at the G7 summit, but the group as a whole — which also includes Canada, France, Germany, Italy and Japan — were able only to reaffirm a commitment to phase out dependency on Russian energy. The G7 noted the "burden" of higher energy prices and said it is working with the IEA on ideas to "reduce price surges". It also called on Opec to continue its recent action to increase production.

The Opec+ group meets this week. US President Joe Biden will visit Saudi Arabia on 15-16 July.

By Ben Winkley