G7 leaders have agreed to study placing global price caps on imports of Russian energy to curb Moscow’s ability to fund its invasion of Ukraine and to contribute up to $5 billion to address global food insecurity, officials said on Tuesday.
The war in Ukraine and its dramatic economic fallout, in particular soaring food and energy inflation, has dominated this year’s summit of the group of rich democracies at a castle resort in the Bavarian Alps.
The European Union will explore with international partners ways to curb Russian energy prices, including the feasibility of introducing temporary import price caps, a section of the final G7 communique seen by Reuters said. The officials said this meant both oil and gas.
The G7 has been debating price caps as a way to prevent Moscow profiting from its invasion of Ukraine, which has sharply raised energy prices, cushioning the impact of Western moves to reduce imports of Russian oil and gas.
Russian oil export revenues climbed in May even though export volumes fell, the International Energy Agency said in its June monthly report.
A cap on the price other countries pay Russia for oil would squeeze Russian President Vladimir Putin’s “resources that he has to wage war and secondly increase stability and the security of supply in global oil markets”, a senior U.S. administration official said on Tuesday.
The idea is to tie financial services, insurance and the shipping of oil cargoes to a cap on Russian oil prices. So if a shipper or importer wanted these services, they would have to commit to the Russian oil being sold for a set maximum price.
Italy, whose economy is reliant on Russian energy, pushed to extend the price cap to gas.
Italian Prime Minister Mario Draghi last week warned of the need to tackle energy prices to contain inflation and said the main objection to a gas cap from fellow Europeans was fear it could lead Russia to reduce supplies further.
France has said the price cap mechanism should extend beyond Russian products to reduce prices more broadly, including for the G7 nations that are looking to source energy from elsewhere.
France supports the language in the final communique but it remains unclear how such a mechanism would work and needs “thorough” discussions, a French official said.
G7 leaders have also agreed to push for a ban on imports of Russian gold as part of efforts to tighten the sanctions squeeze on Moscow, an EU official said on Tuesday.
Britain, the United States, Japan and Canada agreed at the start of the G7 summit on Sunday that they would ban imports of newly mined or refined Russian gold, while the European Union expressed some reservations.