G-7 Announces Plans for Global Price Cap on Russian Oil
The Group of Seven nations intends to implement a price cap on Russian-origin crude oil and petroleum products, according to a joint statement released Sept. 2 by the G-7 Finance Ministers from their summit in Elmau, Germany. The statement included plans to implement a "comprehensive prohibition of services" that support maritime transportation of Russian-origin crude oil and petroleum products, based on "a recordkeeping and attestation model" covering relevant contracts. The G-7 said that they were urgently working to finalize and implement the measure in their own jurisdictions through domestic legal processes while building support internationally for the measure.
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The cap is designed to reduce Russian revenues and war-making capability while limiting the impact on global energy prices, and also minimizing the impact on low and middle-income countries. The statement went on to say that the cap would "build on and amplify the reach of existing sanctions ... ensuring coherence through a strong global framework."
The statement urged all countries that still seek to import Russian oil products to commit to doing so only at prices at or below the price cap. To that end, it invited other nations to contribute to the design and implementation of the cap. The G-7 is intent on building a broad coalition of participating nations and said that the cap is part of a process of phasing out Russian oil from their domestic markets. The price itself will be "based on a range of technical inputs" and decided by the full coalition of participants prior to implementation in each jurisdiction, the group said. The effectiveness and impact will be closely monitored and the price adjusted as necessary. The G-7 aims to ensure consistent implementation across jurisdictions and limit possibilities for circumventing the regime, while minimising administrative burdens for participants. The statement acknowledged that its members are looking for other ways to curb rising energy prices, including the possibility of "temporary import price caps."
“Today, the G7 took a critical step forward in achieving our dual goals of putting downward pressure on global energy prices... " Treasury Secretary Janet Yellen said in a related statement. The 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." She went on to say that there already have been signs of the impact of the proposed cap, given "Russia’s hurried attempts to negotiate bilateral oil trades at massive discounts."
OFAC anticipates publishing preliminary guidance on the implementation of the price cap later this month, according to a Sept. 2 notice.