The G7 are pressing on with their price cap on Russian oil, targeting a date of December 5 for having a mechanism in place to achieve this, an anonymous senior G7 official told Reuters on Wednesday.
December 5 is also the date that the EU's ban on Russian seaborne crude oil imports goes into effect.
"The goal here is to align with the timing that the EU has already put in place. We want to make sure that the price cap mechanism goes into effect at the same time," the official said.
A price cap on Russian oil purchases would theoretically impede the intake of Russia's oil revenues that are funding its invasion of Ukraine. The price cap plan the G7 has cooked up, however, is not without its challenges.
For starters, the Group of Seven richest economies has not yet spelled out how such a plan would work, such as how to enforce such a price cap. To be successful, the plan would need broad support from all major Russian crude buyers, including India and China. More importantly, it would need Russia to go along with the price cap—something Russia said it would not do.
Nevertheless, the G7 is still hoping that setting a price cap that is above Russia's production costs would incentivize Russia to go along.
Russian Deputy Prime Minister Alexander Novak already stated last week that Russia would not export oil to the market if the price cap was set below the cost of producing the oil. Just days after Novak's statement, Russia Central Bank head Elvira Nabiullina took it a step further: Russia would not sell oil to any country participating in any price cap, implying that even if the price cap were set above production costs, Russia would refuse to go along with the price cap plan by merely refusing to sell those countries any crude oil.
Instead, Nabiullina said that Russia would sell oil only to the countries that don't enact a price cap.
By Julianne Geiger for Oilprice.com
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