Energy crisis: G7 finance ministers want to cap the price of Russian oil

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G7 finance ministers want to cap price of Russian oil

02.09.2022, 15:40

2 min reading time

The G7 finance ministers want to cap the price of Russian oil.

The finance ministers of the G7 of economically strong democracies want to push through a price cap on Russian oil. In a joint statement on Friday, which is available to the German Press Agency, they also called on all countries that import Russian oil to follow this measure. “We are aiming for a broad coalition to maximize effectiveness,” the paper says.

In essence, the aim is to force Russia to sell oil to large buyers such as India at a significantly lower price in the future. The hope is that this will ease the global oil markets and cushion the effects of the Ukraine war on energy prices. At the same time, Russia would no longer be able to benefit from rising oil prices and thus fill its war chest.

Russian oil: price cap only works globally

The sea transport of crude oil and petroleum products of Russian origin should only be possible worldwide if the oil was bought below a certain price. The price cap could work if the West linked important services such as insurance for oil transport to compliance with the regulation. These are largely in Western hands.

Chancellor Olaf Scholz (SPD) recently emphasized that a price cap only works if it is organized globally. EU Commission President Ursula von der Leyen also said on Thursday in the ZDF program “Maybrit Illner” that “a large number of countries internationally” is necessary. “It now seems clear that we will achieve this goal.” When asked if China was also on board, she said: “Not everyone is on board.”

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Germany

Germany

Steam rises from the cooling towers of the Jänschwalde lignite-fired power plant of Lausitz Energie Bergbau AG (LEAG). Because of the war in Ukraine, power plants are booming – even if they are criticized. According to the Federal Network Agency, the supply situation in Germany is currently “tense”. Although the gas storage facilities are 56.7 percent full and the supply situation is stable, experts from the consumer advice center expect prices to rise three to four times if gas supplies are cut further or not at all. Most recently, Gazprom had throttled gas flows through the Nord Stream 1 pipeline by 40 percent. The federal government therefore feels compelled to get shut-down coal and nuclear power plants up and running again in order to continue to cover electricity needs. However, the federal government is sticking to the planned phase-out of coal by 2030 and is therefore ordering liquid gas from abroad. However, the LNG terminals required for this have yet to be expanded. At the same time, leading politicians are already calling on the population to save energy.

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G7: Not fixed at exact price levels

With the declaration, the G7 themselves committed themselves to quickly implementing the price cap in their own countries. In the EU, where an oil embargo against Russia has already been decided, all member states should agree first. The aim is to implement it within the time frame of the sixth EU sanctions package, it said.

The finance ministers of the G7 did not initially commit themselves to an exact upper price limit. It also depends on technical issues. The cover should be communicated transparently and its effect closely monitored.

cl / dho
DPA
AFP

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