Russia-Ukraine war: G7 nations and allies approve price cap on Russian oil

As the Russian-Ukraine war in Eastern Europe continues unabated, a restriction on the price of Russian oil has been formally authorised by the G7 group and its allies. The Group of Seven (G7) and Australia announced in a joint statement that the price cap will go into effect on December 5 or "very soon thereafter".

In a highly anticipated and intricate political and economic gambit intended to keep Russia's supplies flowing into international markets while restricting President Vladimir Putin's ability to finance his war in Ukraine, the European Union was moving closer to limiting the price of Russian oil at $60 per barrel, Associated Press reported. 

All EU member states had to agree on the proposal to cap the price, which prohibits countries from paying more above $60 (€57; £48) a barrel. According to BBC, Poland declared its support on Friday after receiving assurances that the cap would be maintained at a rate that was 5% below the ongoing rate. 

G7 nations proposed a price cap in the month of September

It is pertinent to mention that the G7 nations proposed a price cap in the month of September in an effort to prevent Moscow from making money off oil exports while preventing a price increase. According to reports, the EU sought to put the maximum at $65-70, but Poland, Lithuania, and Estonia deemed that this was too expensive. Warsaw held out in order to explore an adjustment mechanism that would maintain the cap below the market rate when the price of oil changed because it wanted the value to be as low as possible.

As per the joint statement, the price restriction was decided upon in order to "prevent Russia from profiting from its war of aggression against Ukraine". It added that the action intends to "support stability in global energy markets and to minimise negative economic spillovers of Russia's war of aggression, especially on low-and middle-income countries, who have felt the impacts of Putin's war disproportionately".  

Furthermore, the price cap deal has been reached just a few days before the EU-wide embargo on the import of Russian crude oil by sea, which takes effect on December 5. 

Only oil and petroleum products that are sold at prices equal to or less than the price cap may be purchased by nations that agree to the G7-led policy, BBC reported. Tankers carrying Russian oil to nations that do not adhere to the price restriction will not be insured, according to Ukraine's allies in the west. as a result of this, Russia will find it challenging to sell oil over that price. 

Meanwhile, Russia criticised the proposal and said it will stop supplying nations with price caps. 

(Image: AP)