G7 Price Cap on Russian Oil Comes into Force

The G7 price cap on Russian seaborne oil exports has come into force on Monday as the Western nations try to curb Moscow’s ability to fund its invasion of Ukraine. Russia said it would not abide by the measure even if it has to cut output. The G7 nations and Australia agreed on Friday to put a price cap of $60 per barrel on Russian seaborne crude oil after the European Union members reached an agreement on the same day, convincing Poland, which argued the price was too high. Russia is the world’s second largest oil exporter.

Disappointed by the G7’s decision, Ukrainian President Zelenskiy said the world had “shown weakness” by setting the cap at that level. Meanwhile, Russian Deputy Prime Minister Novak said on Sunday the decision was contradictory to the rules of free trade.

“We are working on mechanisms to prohibit the use of a price cap instrument, regardless of what level is set, because such interference could further destabilize the market,” Novak said.

“We will sell oil and petroleum products only to those countries that will work with us under market conditions, even if we have to reduce production a little,” he added

The G7 agreement will allow Russian oil to be shipped using G7 and EU tankers, insurance and credit institutions only if it is bought at or below the $60 cap.

Still, some industry leaders and government officials think Russia could secure enough tankers to ship most of its oil beyond the reach of the cap.

In addition, Zelenskiy thinks the $60 cap would not do much damage to Russia’s war finances. “You wouldn’t call it a serious decision to set such a limit for Russian prices, which is quite comfortable for the budget of a terrorist state.” he said.

The United States and its allies have imposed sweeping sanctions on Russia since it invaded Ukraine on Feb. 24 and sent billions of dollars in aid to the Ukrainian government.

Ukraine and its Baltic allies have also criticized French President Macron, who suggested that the West should consider Russia’s need for security guarantees if it agrees to negotiations to end the war.

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