Russian oil price cap proposal nears G7 summit | G7

A proposal to cap the price of Russian oil and gas pipeline to cut Kremlin revenues and reduce inflationary pressures in the west garnered support at the G7 leaders’ meeting in Bavaria on Sunday.

The three-day event will be dominated by discussions on how to tighten the economic and military noose around Vladimir Putin without leading to dire fallout, including a backlash among Western consumers and starvation in a rain-starved global south. and cereals.

Joe Biden, at the start of the summit held in the Bavarian Alpine castle that hosted the 2015 G7 meeting, said Putin had been thwarted by the degree of unity shown by the West. “Putin counted on it from the start that NATO and the G7 would somehow break up. But we didn’t and we won’t,” Biden said.

But behind the scenes, as Putin rained down missiles on Kyiv and made new territorial gains in eastern Ukraine, there are deep fears that the West has yet to assemble the political mix that will force him to back down. . A plan to ban Russian gold imports followed by the United States and the United Kingdom, considered a gradual and not decisive step, does not yet have clear support from the EU.

The double cap on the price of Russian oil and gas pipeline is strongly urged by Italian Prime Minister Mario Draghi, and at Sunday’s opening meeting he won the support of French President Emmanuel Macron. “There is now more than a faint optimism that it will work,” a source said.

The gas cap would simply work by European countries refusing to pay above an as yet unspecified fixed price for Russian gas. It is claimed that Russia has no other short-term market to sell the pipeline to, and unless it is prepared to deal a severe blow to its revenues by shutting down the pipeline completely, it would have no other choice than to sell at the price dictated by Europe. . Liquid gas would be exempt from this maximum price.

“Capping the price of fossil fuels imported from Russia has a geopolitical purpose as well as an economic and social purpose,” Draghi told the G7. “We need to reduce our funding to Russia. And we must eliminate one of the main causes of inflation. We must avoid the mistakes made after the 2008 crisis: the energy crisis must not produce a return of populism.

“We must mitigate the impact of rising energy prices, compensate struggling families and businesses, and tax companies that make extraordinary profits.”

A price cap would work by dictating to the quasi-monopoly responsible for insuring Russian tankers that they will be sanctioned if they allow oil to be sold above a fixed price. Around 95% of global tanker liability cover is provided by a London-based insurance organization called the International Group of Protection and Indemnity Clubs, which must comply with EU law.

The proposal has been heavily promoted by US Treasury Secretary Janet Yellen and may have to be reconciled with OPEC, the club of oil producers.

Russian oil production has fallen under the pressure of sanctions, but its revenue per barrel is rising due to high oil prices around the world, the opposite of what Western leaders want.

The United States and Canada have banned imports of Russian oil while the European Union has agreed to ban maritime imports of Russian crude by the end of the year.

Germany is probably the G7 country most worried about price caps. He fears a crisis within the EU over the proposal and that Putin could simply cut off gas supplies to Europe. Last week, Russia cut gas flows by 60%, citing delays in maintenance equipment, but the explanation was not seen as credible within the G7. A cut now would leave Europe struggling to build up the gas reserves it needs to survive what could be a harsh winter.

EU countries have been told to fill their gas reserves to a minimum of 80%, but they are well below that.

Ukrainian President Volodymyr Zelenskiy will address the G7 via video link on Monday, where he is expected to call for more heavy weapons and artillery.

As part of greater awareness in the South, German Chancellor Olaf Scholz on Monday invited the leaders of Argentina, India, Indonesia, Senegal and South Africa to the Alpine summit.

While Argentina and Indonesia voted in a crucial UN vote to condemn Russia, the other three abstained.

But all are directly affected by a long-term hunger crisis triggered by the blocking of grain and wheat exports from Ukraine, and India has imposed restrictions on wheat exports.

theguardian Gt

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