WASHINGTON: The Group of Seven countries is working to cap the price of Russian oil in an attempt to limit Moscow’s ability to fund its invasion of Ukraine, a plan analysts say could work in the long term but might boost oil prices in coming months.
Officials in G7 countries, including U.S. Treasury Secretary Janet Yellen, say the unprecedented measure, set to begin Dec. 5, will cut the price Russia receives for oil without reducing its petroleum exports to world consumers.
Russian President Vladimir Putin could push back, causing stress in oil markets even as the plan comes together.
Below are questions about the price cap and challenges it faces.
Who’s in the price cap coalition?
The G7 wealthy nations – the United States, Japan, Germany, Britain, France, Italy and Canada – and the EU are hammering out details of the plan. The G7 wants to enlist other countries, including India and China, which have been snapping up heavily-discounted oil from Russia since its Feb. 24 invasion of Ukraine.
Moscow has managed to maintain its revenues through those increased crude sales to India and China.
But even if India and China don’t join, a cap could help force down prices for Asia and other consumers. U.S. Treasury Assistant Secretary for Economic Policy Ben Harris said on Sept. 9 that if China negotiates a separate 30%-40% discount on Russian oil because of the price cap “we consider that a win.”
The consensus on the price cap level will be reached with the aid of a “rotating lead coordinator,” the U.S. Treasury Department said on Friday, suggesting that countries in the coalition will have a temporary leadership role as the plan proceeds.