WASHINGTON — The top economic officials of the world’s major developed nations on Friday agreed to move ahead with plans to form an international buyer’s cartel to keep Russian oil prices in check, while draining President Vladimir V of the United States. Accelerated an ambitious effort to avoid. Putin’s booty.
G7 finance ministers said they were finalizing the details of the price cap after a virtual meeting. must be implemented by early December, prior to the ban. The Biden administration has feared these moves could send energy prices skyrocketing and plunge the global economy into recession.
Oil prices rose on Friday, with US benchmark West Texas Intermediate Crude Oil rising more than 3% to just above $89 a barrel. Still, prices are down he week, well below mid-June highs of around $120 a barrel.
In recent months, Treasury Secretary Janet L. Yellen and her team have traveled the world to cement support for the idea of price caps. and how it would be implemented.
The price cap provides an exception to European sanctions by allowing insurers to cover oil cargo only if it sells below a certain price. The UK and the European Union are global hubs for the maritime insurance industry, and a ban on insurance or financing transactions involving Russian oil could cause widespread disruption to Russian oil shipments around the world. .
Making sense of US gas price declines
“We affirm our joint political intention to finalize and implement a comprehensive ban on services enabling the global maritime transport of crude oil and petroleum products of Russian origin.” The finance ministers wrote in a joint statement. “The provision of such services is permitted only if oil and petroleum products are purchased at or below prices determined by a broad coalition of countries observing and enforcing price caps.”
The finance minister said he had not yet agreed on the price at which Russian oil could be sold, but “it will be set at a level based on a range of technical inputs and decided by the All-Union prior to implementation in each region.” said. jurisdiction. “
In a statement on Friday, Yellen said the price cap would be an important tool to fight inflation and protect Americans from future energy price spikes.
“By committing to finalize and implement price caps, the G7 will support Russia’s commitment to illegal warfare while maintaining supply to global energy markets by keeping Russian oil in circulation at lower prices. “We’ve seen energy prices fall in the United States, but energy costs remain a concern for Americans and a global concern,” she said. continues to rise to
This proposal still faces considerable obstacles.
The European Union will have to amend a set of sanctions due to come into force on December 5th to incorporate price caps. This requires unanimous consent of all 27 Member States.
Biden administration officials are increasingly confident that progress in the G7 can revitalize international efforts to impose price caps. But they say it will be more difficult to get all the member states of the European Union to participate in the plan. had already agreed to do so. However, European countries like Hungary, which previously sought exemption from the European import ban on oil it buys from Russia via pipeline, have yet to agree to such a plan.
Energy analysts are skeptical that the price cap could keep oil prices in check. The maritime insurance industry, responsible for ensuring that buyers and sellers comply with price caps, has warned that insurers lack the ability to police transactions.
Moreover, while the United States and Europe are moving away from Russian oil, countries such as China and India are buying oil at deep discounts. This has allowed Putin to support the economy despite global sanctions imposed on central banks, the financial sector and the military industry.
Read More About Oil and Gas Prices
The United States has been working to expand the coalition beyond the G7, actively seeking help from countries such as South Korea and India. to discuss global energy security and promote the concept of price caps.
Biden administration officials hope that if a broad enough coalition agrees to a price cap, countries that don’t want to formally participate will have more bargaining power in price negotiations with Russia.
In a joint statement on Friday, the finance ministers said, “In line with our extensive and ongoing engagement with various countries and key stakeholders, we are committed to providing input on the design of the price cap and urging all to implement this important measure. I am requesting the country of “We are trying to establish a broad coalition to maximize effectiveness and commit to all countries that intend to import Russian oil and petroleum products to do so only at a price below the ceiling price. I urge you to.”
Enforcing a price cap is critical to its success. The finance minister said he would use a “record-keeping and proof model” to track whether oil trades were below the price cap and would seek to minimize administrative burden.
It remains unclear how Russia will respond and whether it will retaliate by refusing to sell oil to boost global prices.
Russian Deputy Prime Minister Alexander Novak said this week that Russia would not sell oil products to countries participating in the price cap, according to Russian state media.
Biden administration officials have argued that Russia is bluffing because it needs revenue from oil sales. Containing oil, they argue, is also harmful to the economy by damaging oil wells.
After surging earlier this year, oil prices have fallen in recent weeks amid concerns about rising output from the United States and a slowing global economy.
Jim Tankersley contributed to the report.