G7 to discuss Russian oil price cap via sanctions relief

A U.S. push for a price cap on Russian oil is set to become a major discussion point at the G7 summit in Elmau, Germany, according to officials, but there remains skepticism about the feasibility of the idea.

Western countries are becoming increasingly frustrated that their embargoes on Russian oil have had the counterproductive effect of driving up the global petrol price, meaning that Moscow, which continues to sell oil to countries such as India and China, ends up earning more money for its war chest.

U.S. Treasury Secretary Janet Yellen has proposed to tackle this issue with a price cap: The idea is that the EU and U.K., which are currently trying to hamper Russian oil sales by banning insurance for the cargo ships that transport oil, would lift this sanction for those countries that accepted to only buy Russian oil at an agreed maximum price.

Officials say that Russia and its oil-purchasing partner countries are struggling to find insurance for tankers, meaning there could be leverage to enforce a price cap in exchange for sanctions relief.

German Chancellor Olaf Scholz said Friday that the proposal will “play a role at the G7 summit,” which Germany hosts from Sunday to Tuesday in the Bavarian castle at Schloss Elmau, but cautioned that it would only be effective if all “or pretty much all” oil-purchasing countries participated.

In addition, the EU would have to amend its latest sanctions package to lift ship insurance bans.

“It’s all very, very complex … but we’re working together very constructively to get it done,” a senior German official said.