G7 finance chiefs see progress on Russian oil price cap plan

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A view shows the Kozmino crude oil terminal on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel

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Sept 2 (Reuters) – The Group of Seven finance ministers are expected to confirm on Friday their intention to impose a cap on Russian oil prices aimed at reducing Moscow’s war revenues in Ukraine while maintaining crude oil to avoid price spikes, G7 officials said.

Ministers from the club of wealthy industrial democracies are to meet virtually and are expected to issue a statement outlining their implementation plans.

“A deal is likely,” a European G7 official said, adding that it was unclear how many details would be revealed, such as the per-barrel price cap level, above which compliant countries would refuse the price. Insurance and Financing of Russian Crude and Oil Product Cargoes.

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Britain’s Finance Minister Nadhim Zahawi said in Washington on Thursday that he hoped the G7 finance ministers “will get a statement that will mean we can move quickly to get this done.” Read more

“We want to push through this oil price cap,” he said at a think tank event in Washington a day after discussing the cap with US Treasury Secretary Janet Yellen.

Despite Russia’s lower oil export volumes, its oil export revenue in June was up $700 million from May due to prices pushed up by its war in Ukraine, it said. the International Energy Agency last month.

Western leaders agreed in June to explore a cap to limit how much refiners and traders can pay for Russian crude — a move Moscow says it won’t abide by and can thwart by shipping oil to states that do not respect the ceiling price. Read more

White House spokeswoman Karine Jean-Pierre declined to comment on G7 plans for the price cap, saying she did not want to “rush this meeting”.

WIDER SUPPORT

The G7 is made up of Britain, Canada, France, Germany, Italy, Japan and the United States. Some bloc officials said the cap needed broader support and questioned whether it could succeed without the participation of major oil consumers China and India, which are unlikely to endorse the plan.

But other G7 officials said China and India had expressed interest in buying Russian oil at an even lower price, in line with the cap.

The cap would rely heavily on refusing London-negotiated marine insurance, which covers around 95% of the world’s tanker fleet, and financing cargoes priced above the cap. But analysts say alternatives can be found to circumvent the cap and market forces could render it ineffective

Another G7 official said the bloc had “a desire to show there is momentum on this” ahead of the European Union’s planned imposition of a regional embargo on Russian crude on December 5.

The US Treasury has raised concerns that the EU embargo could trigger a rush for alternative supplies, pushing global crude prices up to $140 a barrel, and it is promoting capping price since May as a way to keep Russian crude in circulation.

Russian oil prices rose ahead of the EU embargo, with Urals crude trading at a discount of $18-25 a barrel to benchmark Brent crude, from a discount of $30-25 a barrel. $40 earlier this year. Read more

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Additional reporting by Jan Strupczewski, Steve Scherer, William James, Leigh Thomas; editing by Raju Gopalakrishnan

Our standards: The Thomson Reuters Trust Principles.

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