The Group of Seven (G-7) countries are moving closer to endorsing a price cap on Russian oil — an untested plan that would seek to limit the Kremlin’s profits from selling the commodity worldwide.
The idea has been floated in recent weeks as the United States and its allies search for ways to further squeeze the Russian economy to punish President Vladimir Putin for the war in Ukraine. Energy exports are the leading source of revenue for the Russian economy.
The price cap has been a source of discussion during the G-7 summit in Germany over the past two days, where President Biden is huddling with counterparts from Germany, France, Italy, the United Kingdom, Japan and Canada. Treasury Secretary Janet Yellen first said last week that the U.S. was discussing the idea of a price cap with its allies.
A senior Biden administration official told reporters on Monday that the G-7 countries were in “final discussions” about an agreement on a global price cap for Russian oil.
The official indicated that the G-7 leaders would endorse the idea and then direct their finance ministers to develop “mechanisms” for setting a global price cap for Russian oil shipments to nations outside of the U.S., Europe and the G-7.
Speaking to reporters later Monday, White House national security adviser Jake Sullivan insisted that the G-7 members were united behind limiting Russian profits from energy.
“There is absolute consensus across the G-7 that the purpose of our energy sanctions on Russia should ultimately be to deny revenue to Russia while at the same time ensuring a stable global energy market,” Sullivan said on the sidelines of the G-7 summit.
“There is also consensus emerging — although there continue to be discussions around it, so I don’t want to get ahead of the leaders on this — that the price cap is a serious method to achieve that outcome,” he said.
Still, specifics for how the plan would work are currently unclear. Sullivan said that while there is agreement around the broad idea, countries are trying to work through the specifics of how it would be implemented.
“This is not something that can be pulled off the shelf as a tried-and-true method that has repeated historical precedent and therefore can simply be taken as a standing option and implemented,” he said.
“In a way, this conversation — starting at the expert working level, then ministers, now leaders — has been one of the G-7 countries puzzling through a difficult challenge together and arriving at a point, we believe, where there is convergence around really trying to pursue this.”
Russia is the world’s third-largest oil producer, and fuel is a major piece of the Russian economy. Countries including the U.S. have sought to hurt the Kremlin by restricting or banning imports of Russian oil amid the country’s invasion of Ukraine.
Amid countries and companies turning away from Russian oil, as well as uncertainty in the market, oil prices have spiked in recent months, sending the price of gasoline skyrocketing.
Late last week, global oil prices had fallen by a few dollars per barrel, but by midday Monday had risen back to about where they were previously — about $110 per barrel.
Meanwhile, the White House announced Monday that the G-7 leaders would move to punish Russia by enacting more sanctions and tariffs on Russian goods. The group is also expected to commit to sending more economic assistance to Ukraine to help the country meet budgetary shortfalls.