G7 Doubles Down on Price Cap Push

G7 member countries said on Tuesday they "remain committed" to efforts to curb Russia's oil revenue without taking its production off line — a position that has led to discussions about a "price cap" for Russian oil.

“We continue to explore further measures to prevent Russia from profiting from its war of aggression and to curtail Russia's ability to wage war," they said in a joint statement.

"As we phase out Russian energy from our domestic markets, we will seek to develop solutions that reduce Russian revenues from hydrocarbons, support stability in global energy markets and minimize negative economic impacts, especially on low- and middle-income countries."

The G7 countries — Canada, France, Germany, Italy, Japan, the UK and the US — said in late June that they would seek to cap Russian oil prices.

That followed a EU decision earlier that month to ban imports of Russian crude by Dec. 5 and ban imports of Russian refined products by Feb. 5. The EU will also block services that facilitate the shipping of Russian oil.

However, there have been concerns, voiced publicly by US officials, that blocking those services could take some 3 million to 5 million barrels per day out of the market, which in turn could push up global oil prices and potentially boost Russia's oil revenue.

The price cap is meant to keep Russian oil on the market but limit the revenue that Moscow receives.

As currently envisioned, it would allow cargoes priced under the cap to use services that would otherwise be prohibited.

Skepticism is high among oil traders and other industry players as to how effective such a scheme would be, especially if major purchasers of Russian oil — namely, India and China — do not sign on.

Tuesday's G7 statement followed several reports suggesting that Europe might be scaling back its efforts to target Russian energy after an official EU announcement on Jul. 21 listed energy as exempt from the bloc's financial sanctions.

However, that exemption only targeted the trade in Russian oil until the twin bans take effect.

The EU's previously announced embargo on Russian oil and its block on shipping services remains intact, although the UK has not yet published its own shipping-related measures.

The G7 statement also followed Japan's recently declared desire to retain its stake in the Sakhalin-2 LNG project in Russia's Far East.

Russian officials have warned that the stakes held by two Japanese firms would be at risk if Japan — a G7 member — participated in the proposed price cap scheme.