G7 members will explore ways of curbing energy costs, including via possible caps on the price of oil and gas, as leaders vow to prevent Russia profiting from its “war of aggression” against Ukraine.
In a communiqué released on Tuesday, the G7 leaders said they would look for ways to reduce Russia’s hydrocarbon revenues while minimizing the negative impact of high energy prices, especially on low and middle-income countries.
The leaders said they would explore the “feasibility” of introducing temporary price caps on energy imports, a reference to a US-led push for a ceiling on the Russian oil price.
Olaf Scholz, German chancellor and host of the meeting, said the idea was “very ambitious” and “a lot of things will have to fall into place” to make it a reality. “It will need a lot of work,” he said at a post-summit press conference.
Scholz said the G7 meeting had sent a signal of “unity and determination to confront Russia’s aggression”, which he described as a “threat to peace and security in the whole world”. He said the G7 had all agreed that Russia “must not win this war”, adding: “We will continue to drive up the economic and political costs for the President. [Vladimir] Putin and his regime, and keep them high. ”
The chancellor said the summit had three main outcomes: a show of support for Ukraine, with the G7 pledging budgetary support totalling $ 29bn and humanitarian aid worth $ 2.8bn and proposing a new “Marshall Fund” to help Kyiv with reconstruction; a joint effort to end global hunger; and a renewed commitment to combating climate change.
The summit was held against a backdrop of rising alarm among G7 leaders about the toll the Ukraine war is taking on their economies. “Rising energy prices are endangering security and stability in many countries,” Scholz said. In their conclusions, the leaders said the conflict was “pushing up inflation to levels not seen for decades”.
The price cap idea is motivated by concerns that Moscow is benefiting from the surge in energy prices, despite the restrictions G7 member states have imposed on Russian energy imports.
“Some producers and speculators are making a lot of money with the current war,” French president Emmanuel Macron said after the summit.
In the final statement, the leaders said they were “working to make sure Russia does not exploit its position as an energy producer to profit from its aggression at the expense of vulnerable countries”.
They also agreed to explore caps on gas prices and not just on oil, reflecting a push by Italian prime minister Mario Draghi, who has been advocating the idea for months.
The G7 agreement pledges to consider a range of approaches to the oil price cap, including options for a “possible comprehensive prohibition of all services” that enable the transportation of Russian seaborne oil, unless it is priced at or below a cap to be determined in consultation with international partners.
The idea is to enforce the cap by limiting the availability of European insurance for Russian shipments, as well as shipping services and US finance. Under the scheme, those services would only be available to importers who adhered to the price ceiling.
G7 leaders said their ministers would evaluate the feasibility of a price cap as a matter of urgency. But officials have cautioned that the scheme was highly complex and would need intensive work as well as buy-in from both industry and a wide range of non-G7 countries that import Russian oil. It could also face challenges in the EU, where sanctions require the consent of all 27 member states.
“We are supportive of the basic structure,” said one G7 official about the price cap idea. “But the details need to be hammered out.”
Another said that all G7 states agreed with the “basic idea that we have to reduce the sources of revenue for Russian oil”.
ExxonMobil chief executive Darren Woods told the Financial Times that trying to fix oil prices would be a “complicated challenge”. “It’s not obvious to me how that mechanism would work,” he said. “In oil and gas, markets work very efficiently and effectively.”
Additional reporting by Tom Wilson in Brussels