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Limit the prices of oil exported by the “aggressor”
“For us, a coherent position of the G7 countries on sanctions is important. They must be further strengthened, by limiting the prices of oil exported by the aggressor”, wrote Volodymyr Zelensky on his Telegram account, to report of his intervention by videoconference before the summit which is currently being held in Germany.
While oil prices have skyrocketed, Russia’s oil revenues are actually on the rise, despite global import bans. The leaders want to use their collective leverage to reduce the revenue Russia receives from countries that still buy its oil.
The G7 countries are considering a mechanism
The G7 countries are considering a “mechanism to cap the price of Russian oil at the global level”, a senior White House official said on Monday.
One of the possible solutions would be to act on the services surrounding the export of Russian crude, transport and insurance notably. Objective: to dry up the main source of income for Russia, to prevent the oil windfall from being used to buy weapons.
While the United States and Canada have banned the import of Russian oil, the European Union, which is more dependent on Russia for its crude oil imports, introduced a gradual embargo in early June. Which will concern two thirds of European purchases. Germany and Poland having decided on their own to stop their deliveries via the Druzhba pipeline by the end of the year, Russian imports will then be affected by more than 90%, according to the Europeans.
In 2021, European imports of Russian oil amount to 80 billion euros, four times more than the value of gas purchases from Russia. Russian oil imports provide 30% of Europe’s needs.
“Absolute consensus” of the G7
After Volodymyr Zelensky’s appeal, the G7 leaders reached a firm agreement on Monday on the need to restrict Russian oil prices.
According to Jake Sullivan, the US national security adviser thus reported that there was “absolute consensus within the G7 that the goal” of its “energy sanctions against Russia should ultimately be to refuse revenues to Russia while ensuring a stable global energy market”.
Adding at the same time that the implementation of such a decision was a complex challenge and that discussions were underway on this subject.
“What are the details? What are the terms of execution? It requires technical work that needs to be done by ministers — energy ministers and finance ministers — to develop a real workable cap that then comes into effect,” the national security adviser said.
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It remains to be seen how, when and to what extent the price of Russian oil will be capped. Officials said the precise mechanism for hitting the cap was still being worked out.
A leverage effect via oil transport networks could in particular make it possible to set a threshold.
Sources: AFP, CNN, Ukrinform
Ukrainian President Volodymyr Zelensky urged G7 summit participants on Monday to tighten sanctions against Russia, including imposing a “price cap” on Russian oil.
If an “absolute consensus” could be found … now remains to implement the appropriate scenario … vast challenge