By Geoffrey Smith
Investing.com — G-7 finance ministers said on Friday they had agreed to impose a price cap on Russian oil purchases, but details on the mechanism
The G-7, comprising the US, Canada, UK, France, Germany and Italy, was designed to limit cash flow, they believe, was ultimately used to finance Russia’s war in Ukraine.
The group stated that it intends to “finalize and implement a blanket ban service to enable the transportation by sea of Russian crude oil and petroleum products of global origin.”
“The provision of such services shall be permitted only if the purchase price of petroleum and petroleum products (the “Price Cap”) is at or below the price determined by a broad coalition of countries that comply and enforce it (the “Price Cap”), ” said a statement issued after the G7 meeting. It added that the cap will be unanimously agreed in advance by all countries adhering to it and reviewed when appropriate.
Oil-related services are primarily targeted at the marine insurance market, which is still dominated by a market effectively controlled by the US and UK Price has little practical impact.
Analysts at Brussels think tank Bruegel argued in July that not only are major buyers such as China and India able to offer alternative insurance contracts, but it is practically impossible to monitor compliance because buyers
In addition, they noted that the price cap mechanism could trigger a negative reaction from the Organization of the Petroleum Exporting Countries, which coordinates its own production with Russia and a handful of other major exporters.
“OPEC will be suspicious of such price caps, as successful experience may encourage the global buyer community to expand the mechanism,” potentially threatening OPEC’s output prices, the authors argue. “Therefore, OPEC may try to block the cap by supporting Russian exports or reducing OPEC exports.”
The so-called OPEC+ group is sure to hold a monthly ministerial meeting next week when the measure is discussed.
The Russian government has said it will not sell to companies that comply with any price cap measures, a position Kremlin spokesman Dmitry Peskov reiterated on Friday.
According to Reuters, Peskov told reporters on a conference call: “Companies implementing price caps will not be the beneficiaries of Russian oil.”
There was little movement in the news, as the move had been anticipated earlier in the week. By : 15 Eastern Time (14: 15 GMT), U.S. crude futures maintained earlier gains, up 2.6% to $88.83 per barrel, while Brent rose 2.5% To