G7 finance chiefs agree on Russian oil price cap but level not yet set

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Sept. 2 (Reuters) – Group of seven finance ministers agreed on Friday to impose a price cap on Russian oil to cut revenues for Moscow’s war in Ukraine while avoiding price spikes, but Russia said it would would stop oil sales to countries that impose it.

The ministers of the prosperous democracies of the G7 confirmed their commitment to the plan after a virtual meeting. However, they said key details, including the level of the price cap per barrel, would be determined later “on the basis of a series of technical inputs” to be agreed upon by the coalition of countries implementing the cap.

“Today we reaffirm our joint political intent to finalize and implement a comprehensive ban on services that enable the maritime transport of crude oil and petroleum products of Russian origin worldwide,” the G7 ministers said.

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The provision of Western-dominated maritime transport services, including insurance and financing, would only be allowed if Russia’s oil cargoes are purchased at or below price levels “determined by the broad coalition of countries adhering to and enforcing the price cap” .

A senior U.S. Treasury official told reporters that the coalition would set a specific dollar price cap for Russian crude and two others for petroleum products — no discounts from world market prices — and revise the price level if necessary.

“This price cap on Russian oil exports is intended to reduce Putin’s earnings, cutting off a major source of funding for the war of aggression,” said German finance minister Christian Lindner, the current G7 finance chairman. “At the same time, we want to curb rising global energy prices. This will minimize inflation worldwide.”

OIL CLOSE

The Kremlin responded to the G7 statement by saying it would stop selling oil to countries applying the price cap, and said it would destabilize global oil markets.

“We just won’t work with them on non-market principles,” Kremlin spokesman Dmitry Peskov told reporters. [nL8N3091TK]

The finance minister said Russia has little choice but to sell oil at reduced prices in line with the ceiling, as India, China and other countries outside the coalition still want to buy oil as cheaply as possible and alternative insurance will be significantly more expensive. .

A view shows the Kozmino crude oil terminal on the coast of Nakhodka Bay near the port city of Nakhodka, Russia Aug. 12, 2022. REUTERS/Tatiana Flour

“We have received positive signals from other countries, but no firm commitments yet,” said a senior G7 source of efforts to recruit other countries into the coalition. “We wanted to send a signal of unity to Russia and also to countries like China.”

The G7 announcement had little effect on benchmark crude oil prices, which rose ahead of an OPEC+ discussion on production cuts on Monday amid weaker demand. read more

Ministers said they would work to finalize the details, through their own domestic processes, with the aim of bringing them in line with the start of European Union sanctions that will ban Russian oil imports into the bloc from December. .

The G7 is made up of Great Britain, Canada, France, Germany, Italy, Japan and the United States.

Enforcing the limit would depend heavily on refusing to take out London-brokered marine insurance, which covers about 95% of the world’s tanker fleet, and financing cargoes priced above the limit. But analysts say alternatives can be found to get around the cap and market forces could make it ineffective. read more

Despite Russia’s declining oil export volumes, oil export revenues rose $700 million in June from May as a result of higher prices from the war in Ukraine, the International Energy Agency said last month.

The statement from G7 finance ministers follows their leaders’ decision in June to examine the limit, a move Moscow says it will not adhere to and could thwart by shipping oil to states that do not adhere to it. keep the price ceiling. read more

PRICE CONCERNS

The US Treasury Department has expressed concern that the EU embargo could spark a battle for alternative stocks, pushing global crude prices to as high as $140 a barrel, and has been promoting the price cap since May as a way to to keep the Russian crude oil flowing.

Russian oil prices have risen in anticipation of the EU embargo, with Ural oil trading at a discount of $18 to $25 a barrel to benchmark Brent oil, from a discount of $30 to $40 earlier this year . read more

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Additional reporting by Jan Strupczewski, Matthias Williams, Steve Scherer, William James, Leigh Thomas, Timothy Gardner, Daphne Psaledakis, and Rami Ayyub; adaptation by Raju Gopalakrishnan and Chizu Nomiyama

Our Standards: The Thomson Reuters Trust Principles.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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