G7 members will explore ways to cut energy costs, including through possible caps on oil and gas prices, as leaders pledge to prevent Russia profiting from its ‘war of aggression” against Ukraine.
In a statement on Tuesday, G7 leaders said they would seek ways to reduce Russia’s hydrocarbon revenues while minimizing the negative impact of high energy prices, especially on low-income countries. and intermediate.
The leaders said they would explore the “feasibility” of introducing temporary price caps on energy imports, a reference to a US-led push for a cap on the price of Russian oil. A G7 official said earlier that countries had agreed it was a good idea, but there was “a lot of work” to be done to make it a reality.
In their statement, the leaders agreed to “continue to impose serious and immediate economic costs on the regime of President Vladimir Putin” for its “unjustifiable war of aggression against Ukraine”.
The conclusions underline the deep concern of the G7 leaders about the consequences of the war in Ukraine on their economies. They said this had exacerbated the economic impact of the Covid-19 pandemic, “causing lower growth, causing significant increases in commodity, energy and food prices and thus driving up the inflation at levels not seen for decades”.
The idea of the price cap is driven by fears that Russia could profit from soaring energy prices triggered by the war in Ukraine, despite the restrictions that G7 member states have imposed on Russian energy imports.
In the final statement, the leaders said they were “working to ensure that Russia does not exploit its position as an energy producer to profit from its aggression to the detriment of vulnerable countries”.
They also expressed concern about the burden of energy price increases and market instability, warning that they “aggravate inequalities nationally and internationally and threaten our shared prosperity”.
The G7 deal includes an effort to explore price caps on gas and not just oil, mirroring a push from Italian Prime Minister Mario Draghi, who has championed the idea for months.
The G7 agreement pledges to consider a range of approaches to oil price caps, including options for a “possible complete ban on all services” that allow Russian oil to be transported by sea, unless that its price is equal to or lower than a ceiling, which is to be determined in consultation with international partners.
The idea is to enforce the cap by limiting the availability of European insurance for Russian shipments, as well as US shipping services and finance. Under this program, these services would only be available to importers who comply with the price cap.
G7 leaders said their ministers would urgently assess the feasibility of a price cap. But officials warned the program was highly complex and would require intensive technical work, as well as buy-in from industry and a wide range of non-G7 countries that import Russian oil. He could also face challenges in the EU where sanctions require the consent of all 27 member states.
“We support the basic structure,” a G7 official said of the price cap idea. “But the details need to be worked out.”
Another said all G7 states agreed with “the basic idea that we need to reduce Russian oil revenue streams”.
ExxonMobil chief executive Darren Woods told the Financial Times that trying to fix prices in the oil market would be a “complicated challenge”. “It’s not obvious to me how this mechanism would work,” he said. “In oil and gas, markets operate very effectively and efficiently.”
Additional reporting by Tom Wilson in Brussels