The promised plan remains mired in debates over feasibility and wisdom, and Germany fears cuts in Russian forces in response.
G7 leaders gave the impression of imposing a value cap on Russian oil in a matter of weeks to deprive Russia of its biggest source of revenue to fund its war effort in Ukraine.
Leaders of the world’s major Western economies have already promised a cap, most recently at a G7 finance ministers’ meeting on Sept. 2, and the plan will take effect on Dec. 5.
But the last G7 only made the most fleeting general comment about “continued cooperation to ensure energy security and affordability at the G7 and beyond. “Terrorist state. “
The concise G7 reference reflects doubts within the EU, basically in Germany, about the wisdom of the formula and how it might follow a yet-to-be-agreed EU formula to enforce a limit on the value of fuel. There were fears that Russia would ban all energy exports to any country by implementing value limits, raising oil prices and imposing more potent Russian pressure on Europe to curtail its war aims from Ukraine.
Tuesday’s G7 assembly was originally convened to discuss value limits and annexation of Donbass, but its focus shifted through this week’s Russian missile attack on Ukrainian infrastructure.
Three states, the US, UK and Canada, have already stopped loading Russian oil and the EU agreed in May to ban all imports of Russian seaborne crude from December 5 and all Russian subtle products from February 5. a time to give Germany and Poland time, but Russia had already lost three-fifths of its ocean crude sales to Europe.
The G7 value cap would in practice parallel to the EU import ban, but would allow EU states to ship oil to third countries only if the oil is sold at a constant value or below a constant value that has not yet been announced. Germany fears that Russia, based on its recent actions, will bring up its risk of not supplying energy to countries that impose a cap. He also believes that other Russian oil importers, such as India, China and Turkey, are unlikely to agree to participate in the program. , making it less effective.
Speaking on Tuesday, German Chancellor Olaf Scholz said he supported “a negotiated process” involving countries such as South Korea, the EU and the G7 to cut costs to a moderate level.
According to Russia’s central bank, exports of its crude oil accounted for 113 billion euros ($99 billion) in profits in 2021, with a peak of 70 billion euros (£62 billion) of subtle products such as gasoline and diesel. Oil industry revenues hovered around 102 billion euros (£90 billion) in the first six months of the war.
Despite skepticism from economists, the U. S. Treasury secretary is not yet able to do so. U. S. Secretary of State Janet Yellen said a cap on foreign costs “will take a hit to Russian finances and obstruct Russia’s ability to pay for its unprovoked war in Ukraine and accelerate the deterioration of the economy. “
The U. S. Treasury The US continues to propose the program for the global south based on estimates that limiting the value of Russian oil worldwide would generate annual savings of 160 billion dollars (165 billion euros, 145 billion pounds) for the 50 largest countries. emerging economies.
The G7 price cap would be enforced preventing guarantees from being provided to Russian cargoes if oil is sold above an as-yet-undefined G7 limit. Officials alluded to $40 to $60 (£36 to £54) per barrel.
The G7 estimates that approximately 95% of the global tanker fleet is covered by marine insurers in the G7 countries, Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
The two main problems of the system are, first, that the price is set at a point that incentivizes Russia to continue trading with the G7, albeit at a lower price, and the time to prevent Russia from diverting its oil sales to non-G7 countries. , adding India, Turkey and China. Array
Supporters of the program, basically the United States, say it would be useful for countries like India to keep buying Russian oil, as it would have to sell it at a reduced price.
The G7 timetable has been hampered by a similar and heated dispute within the EU over whether to impose a cap on the value of fuel. Spain and Portugal have already set value limits on fuel used for electricity, and the state subsidizes manufacturers for lost revenue.
Germany opposes this because it fears that a value cap could increase demand, leading to shortages and inspiring fuel manufacturers such as Norway, Qatar and the US. The U. S. government is looking for other, more successful markets outside the EU. But European Commission President Ursula von der Leyen supports a transitional value cap followed by broader reforms of the electricity market. There is no agreement on whether the cap is imposed on long-term contracts, fuel used to generate electricity and all fuel trade, not just Russians.
Countries also deserve to know how to compensate gas-fired power plants for the discrepancy between the cap price and the above-market price they buy fuel, either through public investment or a tax on other power producers.
While EU heads of government are due to talk about the factor next week, the G7 plan will be finalized although the concept has been circulating since June.
Most energy experts, such as the International Energy Authority, say the EU can get through the winter primary cuts as the garage has a capacity of around 90%, but they are less confident about winter 2023.