The Group of Seven (G7) leader on Tuesday agreed to develop a price cap mechanism for Russian oil, aiming to cut Kremlin’s avenues of funding the war on Ukraine.
US officials said that US and its allies have understood that Putin is not making less but more money via crude oil since the war broke out and sanctions have not been fully effective in stopping Russia’s oil exports.
The decision also comes as the Biden administration’s ratings plummet due to rising energy prices and inflation. “The goal here is to starve Russia, starve Putin of his main source of cash and force down the price of Russian oil to help blunt the impact of Putin’s war at the pump,” an official told CNN.
The announcement will shake markets and Russia could still sell its oil through back channels but it will not be able to rake in the heavy profits.
The plan behind the oil price cap mechanism is consumer or buyer nations will set a low price for Russian oil and Moscow will have to accept since they need the revenue.
There are fears of retaliation from Russia as it could retaliate by further cutting energy supplies to Europe.
The National Security Adviser Jake Sullivan also said sorting out ‘immensely complex logistical and technical aspects’ is also a tough objective.
The question of unity among consumer countries also remains. Also if this were to be implemented then existing sanctions against Moscow will be tweaked, according to European Council president Charles Michel.
G7 leaders have tasked ministers to urgently focus on ‘developing, consulting with third countries and the private sector in an effort to develop a price cap around oil’, an official told news agency AFP.
The official announcement is expected to come in the final communique later as a three-day G7 summit in the Bavarian Alps gradually draws to an end.
It was also reported that the United States led the push for an oil price cap at the meeting of the club of rich nations – which includes Britain, Canada, France, Germany, Italy and Japan.
The West imposed several sanctions on Russia in response to Putin’s aggression on Ukraine but the targeting of its oil industry is a major step as it signals an attack on Russia’s core industry.
(with inputs from