Russia-Ukraine war: G7 agrees to $60 per barrel oil price cap

The G7 countries and Australia agreed on a price cap for Russian oil at $60 last week. The agreement followed the approval of holdout Poland which would be up for formal approval.

The G7 and Australia gave their approval on the price cap on Russian crude oil Friday last week. The European Union agreed on the price after Poland gave its support. The G7 countries and Australia later said the implementation of the price cap would take effect by Sunday, December 5, or even sooner.

The countries said they anticipated that any changes made to the price would include some form of grandfathering for compliant transactions to be concluded before the change. The price cap aimed to reduce Russia’s revenue from selling oil while preventing the increase in global oil prices after the EU embargo on Russian crude oil would take effect on Sunday.

European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s revenues from oil.

“It will help us stabilize global energy prices, benefiting emerging economies around the world,” tweeted von der Leyen, adding that over time, the price cap would be adjusted in response to market developments.

The G7 price cap will also allow non-EU countries to continue importing seaborne Russian crude oil, but will not allow shipping, insurance, and re-insurance firms from handling cargoes of Russian crude oil around the world unless sold for less than the price cap. As the leading shipping and insurance firms are based in G7 countries, the price cap would make it difficult for Russia to sell its oil at a higher price.

On Saturday, US Defense Secretary Lloyd Austin accused Russia of “deliberate cruelty” in the war it is waging on Ukraine, saying that Moscow was purposely targeting civilians in its relentless strikes across the country in response to significant losses on the ground.

“With deliberate cruelty, Russia is putting civilians and civilian targets in its gunsights,” said Austin in his remarks at the Reagan National Defense Forum in Simi Valley, California over the weekend. “Russian attacks have left children dead, schools shattered, and hospitals smashed.”