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A source familiar with the G7 meetings said on Tuesday that the Group of Seven democracies had cordial and fruitful discussions with China and India over a proposal to control the price of Russian oil, adding that the two largest oil consumers would have incentives to comply.
The source, who wished to remain anonymous, stated that although the price-per-barrel cap level had not yet been decided, it would need to be high enough to provide Russia with a reason to continue oil production.
Due to Western sanctions against Moscow over its invasion of Ukraine, Russian crude has been selling at steep discounts of $30 to $40 per barrel compared to benchmark Brent crude prices of $110 to $120.
In an effort to decrease Moscow’s income and drain its war chest, the G7 leaders decided on Tuesday to investigate the possibility of placing a ban on transportation Russian oil that has been sold for more over a specific price.
US Treasury Secretary Janet Yellen has pushed for the cap as a way to reduce Russia’s oil revenues while keeping supplies on the market and preventing another significant price spike that could trigger a recession. The European Union is getting ready to impose a phased embargo on Russian oil later this year.
According to the source, the G7 governments were still deciding whether services for oil transportation may be discontinued for shipments that cost more than the ceiling and were considering outright bans on shipping, insurance, trade finance, cargo brokerage, and other services.
Many nations may still acquire Russian crude thanks to Western sanctions, and India and China have boosted their purchases at significant savings. According to the insider, the idea would allow Beijing and New Delhi to purchase Russian crude at even more affordable costs.
Given the small number of ships that would be accessible for evading the sanctions that are outside of London’s insurance and financing channels, the source added that if Russia were to simply refuse to sell its crude at the cap price, it would have few choices to sell it at higher rates.
Due to its limited storage capacity, Russia would then be forced to drastically reduce production, which would reduce its cash flow and further harm its energy sector, the source noted.
