The Group of Seven nations is looking at a price cap on Russian oil. The European Union is discussing a proposal from the G7 to put a price cap on Russian sea-borne oil in the range of $65 to 70 per barrel.
The proposal is being discussed within the EU with the aim of reaching a common position by the end of the day.
Ambassadors from the 27 EU nations want to reach a common position, but currently, the views are split. Some are pushing for a much lower price cap, and others are arguing for a higher one.
The G7, including the United States, as well as the whole of the European Union and Australia, are slated to implement the price cap on sea-borne exports of Russian oil on Dec. 5.
The move to potentially cap Russian oil is part of sanctions intended to slash Russian revenue from its oil exports. Less money from oil means less money to finance its ongoing invasion of Ukraine.
A senior U.S. treasury official said that the hope is that the EU will finish its consultation relatively soon in order to put the G7 in a position where the whole coalition can announce a price.
The G7 price cap would allow companies to provide services including insurance, shipping, and financing on Russian oil imports to coalition members, so long as the purchase of that petroleum is under the price cap.
The U.S. Treasury issued guidelines that spell out how U.S. companies can provide services without penalties if the shipments are purchased below the price cap. The coalition has agreed to set a fixed price on Russian oil rather than a floating rate, discounted to an oil price index.
Some 70 to 85 percent of Russia’s crude exports are carried by tankers rather than pipelines. The idea of the price cap is to prohibit the shipping, insurance, and reinsurance companies from handling cargos of Russian crude around the globe, unless it is sold for no more than the maximum price set by the G7 and its allies.
The world’s key shipping and insurance firms are based in G7 countries. Therefore, the price cap would make it very difficult for Moscow to sell its oil for a higher price.
Oil is Russia’s biggest export item, accounting for some 10 percent of the world supply.