The West's biggest economies on Friday agreed to impose a price cap on Russian oil in an attempt to reduce Moscow's ability to fund its war in Ukraine without further stoking global inflation.
Finance ministers from the G7 group of countries 鈥� the United States, Japan, Canada, Germany, France, Italy and the United Kingdom 鈥� said they would ban the provision of "services which enable maritime transportation of Russian-origin crude oil and petroleum products globally" above the price cap. That could block insurance cover or finance for oil shipments.
The maximum price would be set by "a broad coalition" of countries, they said in a joint statement.
Russia had already threatened to retaliate by banning oil exports to countries that participate.
"We will simply not supply oil and petroleum products to such companies or states that impose restrictions, as we will not work non-competitively," Deputy Prime Minister Alexander Novak told reporters Thursday, according to state news agency TASS.
The West has already , but Moscow has continued to earn billions of dollars a month by diverting oil to China and Asia.
The Biden administration has been pushing for governments to introduce a price cap because it would reduce revenue that President Vladimir Putin needs to fund his war in Ukraine, while theoretically allowing Russian barrels to continue to flow to global markets, avoiding a new inflationary supply shock.
"The price cap is specifically designed to reduce Russian revenues and Russia's ability to fund its war of aggression whilst limiting the impact of Russia 虂s war on global energy prices, particularly for low and middle-income countries," the G7 finance ministers said.
But the measure still needs much work and will be extremely complex to manage. How, when and by how much the price of Russian oil could be capped remains to be seen. It would also need broad international support to be effective.
Since the beginning of July, oil prices have fallen roughly 18% in anticipation that recession will reduce demand, but they're still about 20% higher than they were one year ago.
Novak has called the proposals to impose restrictions "completely absurd" and said they could destroy the global oil market, TASS reported.
"Such attempts will only destabilize the oil industry, the oil market," he said. "This will fully ruin the market," he added.
Europe and the United States have barred most imports of Russian oil. But the plan to pile pain on Putin hasn't worked.
Flows of crude oil and other oil products to the United States, United Kingdom, European Union, Japan and South Korea have dropped by nearly 2.2 million barrels per day since the start of the war in Ukraine, according to the International Energy Agency.
But two-thirds of this decline has been rerouted to other markets like , helping pad Moscow's coffers. Export revenues in July were about $19 billion, the IEA said.
Russia's control of large swaths of global energy supplies remains a major challenge six months since its invasion of Ukraine. This week, Russia temporarily natural gas deliveries to the region through a vital pipeline and cut off all supplies to a French utility, exacerbating problems that have sent European inflation to a record high of 9%.
Russian state energy giant Gazprom said that the cut in deliveries through the Nord Stream 1 pipeline was due to a planned shutdown for a few days for maintenance work. It is supposed to reopen on Saturday.
鈥� Chris Liakos, Anna Cooban and Manveena Suri contributed to this report.
