G7 and Australia join the $60 cap on EU Russian oil prices

Archive – An oil company burning surplus (Archive) – Stringer/dpa

The G7 member countries and Australia have reached a consensus to impose a maximum price of $60, about 57 euros at the exchange rate, on the price of a barrel of Russian oil, in line with the unanimous decision of the Member States of the European Union.

With this decision, in addition to the EU-27, Canada, the United States, Japan, the United Kingdom and Australia have committed to prevent Russia «from benefiting from its war against Ukraine», supporting stability in world energy markets and minimizing the economic effects of the war, the countries said in a joint communiqué.

As agreed within the European Union, the cap on the price of a barrel of Russian crude oil will come into force on December 5, 2022. The G7 countries and Australia have also announced that they will harmonize the implementation of the price cap in their jurisdictions.

Meanwhile, States have reaffirmed their intention to gradually eliminate dependence on crude oil and its derivatives, especially those of Russian origin.

And despite their claims, they have clarified that the price cap is designed not for their own use – as many of them hope to decrease their dependence on Russian oil soon – but so that domestic service providers will not sell oil and its derivatives from Russia to third countries above $60, greatly restricting the Kremlin’s revenues.

«We encourage third countries seeking to import crude oil and petroleum products of Russian origin by sea to take advantage of the price cap. We note that this is in the economic interest of these countries, as imports below the price cap will help reduce energy prices and restrict Russia’s ability to further benefit from the war premium it has been earning,» the G7 has detailed in its statement.

All in all, the states have pledged to monitor «closely» the effectiveness and impact of the oil price cap.

«We will be prepared to review and adjust the price cap as appropriate. (…) In the event of a price review, we anticipate including a form of grandfathering to allow for transactions that were concluded prior to the review in accordance with the previous price cap,» they added.