G7 set to discuss cap on price of Russian oil in bid to ease prices

Group of Seven finance ministers will hold talks this week on allowing global purchases of Russian oil at a capped price -- a gambit that the US hopes will ease energy market pressures and slash overall Russian revenues from crude.

Treasury Secretary Janet Yellen and her counterparts will discuss the measure further in a session on Friday, US officials said. The plan would allow purchasers of Russian oil under a capped price to continue getting crucial services -- like financing and insurance for tankers. 

The European Union, UK and Switzerland all plan to ban their companies from providing those services for Russian oil shipments beginning in December.

“This is the most effective way, we believe, to hit hard at Putin’s revenue and doing so will result in not only a drop in Putin’s oil revenue but also global energy prices as well,” White House Press Secretary Karine Jean-Pierre said Wednesday. “We’ll hear more on Friday how this is going to work, and it is not just us -- it is also a partnership with our allies, the G-7. So we believe this is going to be a way to really hit Russia financially.”

It’s not clear what the price cap would be or which countries would join the effort.

The US and its allies have grappled with how best to sanction Russia after its invasion of Ukraine rattled global energy markets and sent crude prices soaring. The G-7 -- which also includes Germany, the UK, France, Italy, Japan and Canada -- pledged earlier this year to curb reliance on Russian energy, including “by phasing out or banning the import of Russian oil.”

US officials have argued that allowing global purchases at or below a price cap would lead other buyers to seek the same discount, and ultimately ease shortages in the market, lower global benchmark prices and force Russia to take a further discount for its exports -- lowering Russia’s overall revenue in the end.

G-7 leaders earlier this June pledged only to examine the price cap plan, but, outside the UK, have not offered much support.

“We believe it’s not only an idea worth exploring, it’s an idea worth implementing and we look forward to hearing what the finance ministers say at the end of the week,” John Kirby, a spokesman for the US National Security Council, said Wednesday.

The UK said Wednesday it backs the plan, with Chancellor of the Exchequer Nadhim Zahawi saying it will be “most effective if supported by the broadest possible coalition.” Deputy US Treasury Secretary Wally Adeyemo also traveled to India last week to discuss the idea of a price cap.