G7 countries plan to impose ‘price caps’ on Russia’s oil exports

In a move that may have an impact on the terms of the growing Russia-india energy partnership - India has enhanced import of Russian energy since the war in Ukraine began as energy prices spiral the G7 countries are considering imposing “price caps” on Russia’s oil to dilute revenue inflows to Moscow.

The West has alleged that these inflows are helping Russian President Vladimir Putin finance the war in Ukraine. At the same time, galloping energy prices and rising inflation across the world have increased domestic political pressure even in western countries, Europe continues to be overwhelmingly dependent on Russian gas, and other economies, including China and India, have leveraged Russian energy sources in the quest for both energy security and to manage inflation.

The G7 is attempting to address this dilemma by imposing price caps - an unprecedented intervention in the global energy market.

US national security adviser Jake Sullivan told reporters that there was “absolute consensus” across G7 that the purpose of energy sanctions on Russia was to deny Russia revenue, while ensuring a stable energy market. “There is also consensus emerging - although there continue to be discussions around it, so I don’t want to get ahead of the leaders on this - that the price cap is a serious method to achieve that outcome.”

The question then, according to Sullivan, is how to do this. “How do you implement it working with consuming countries and with the private sector? What are the details? What are the methods of execution? That requires technical work that has to be done by ministers - energy ministers and finance ministers - in order to develop an actual executable cap that then goes into effect.”

When asked if President Joe Biden was lobbying in favour of the idea of price caps at the G7, Sullivan said, “I wouldn’t describe what the President has been doing here as lobbying so much as posing the problem, which is: If you merely try to reduce flows and not reduce price, you have certain impacts on the energy market that are averse, whereas if you reduce price, if you focus on price more than flows, you might be able to actually maximise your overall objectives of both depriving revenues to Putin and keeping energy market stable.”