The finance ministers of the G7 agreed on Friday to move forward with a plan to put a price cap on purchases of Russian oil and petroleum products over the country's invasion of Ukraine.
Why it matters: The ministers said the cap, proposed by G7 leaders back in June, is aimed at limiting the invasion's effect on global energy prices while preventing the Kremlin from further profiting from its oil exports while damaging its ability to fund its war against Ukraine.
- It would be among the most aggressive energy policy responses to the invasion — but also reflects a fraught bid to isolate President Vladimir Putin without further wreaking havoc on oil markets.
What they're saying: "We remain steadfast in our support for and solidarity with Ukraine. We will continue to stand with Ukraine for as long as it takes," the finance ministers said.
- They said the price cap would work by prohibiting the maritime transportation of Russian crude oil and petroleum products unless those products were "purchased at or below a price (“the price cap”) determined by the broad coalition of countries adhering to and implementing the price cap."
U.S. Treasury Secretary Janet Yellen said in a statement Friday that the agreement is "a critical step forward in achieving our dual goals of putting downward pressure on global energy prices while denying Putin revenue to fund his brutal war in Ukraine."
- "While we’ve seen energy prices ease in the United States, energy costs remain a concern for Americans and continue to be elevated globally," she added. "This price cap is one of the most powerful tools we have to fight inflation and protect workers and businesses in the United States and globally from future price spikes caused by global disruptions."
- "We have already begun to see the impact of the price cap through Russia’s hurried attempts to negotiate bilateral oil trades at massive discounts," Yellen said.
The other side: Officials in Russia, a key oil exporter, threatened on Thursday — and again today — to withhold sales to countries that take part in the capping plan.
- "We will simply not supply oil and petroleum products to such companies or states that impose restrictions, as we will not work non-competitively," Deputy Prime Minister Alexander Novak said Thursday, CNN reports, citing Russian state news.
The big picture: The ministers said they hope to time the implementation of the price cap with the European Union's sixth sanctions package against Russia, which in part banned imports of Russian seaborne crude oil and petroleum products.
- It's unclear whether key buyers of Russian barrels, including China and India, will participate.
What's next: Crafting the specifics. The document invites input on the design, and says the initial cap will be "at a level based on a range of technical inputs."
- The cap will have to be implemented within the G7 countries' own jurisdictions, including all 27 members of the EU.
Go deeper ... Biden's effort to isolate Russia has a big problem: India
