G7 members will explore ways to cut energy costs, including through potential oil and gas price caps, while leaders vow to prevent Russia from profiting from its “war of aggression” against Ukraine.
In a communiqué released on Tuesday, G7 leaders said they would look at ways to reduce Russia’s revenues from hydrocarbons while minimizing the negative impact of high energy prices, particularly on low- and middle-income countries.
Leaders said they would study the “feasibility” of imposing temporary price caps on energy imports, a reference to a US-led push to cap Russia’s oil price.
Olaf Scholz, Chancellor and host of the meeting, said the idea was “very ambitious” and “a lot of things have to fit together” to make it a reality. “It will take a lot of work,” he said at a press conference after the summit.
Scholz said the G7 meeting sent a signal of “unity and determination to confront Russia’s aggression,” which he described as “a threat to peace and security around the world.” He said the G7 all agreed that Russia “must not win this war,” adding, “We will continue to inflate the economic and political costs for the President.” [Vladimir] Putin and his regime, and hold them up.”
The Chancellor said the summit showed three main results: a show of support for Ukraine, with the G7 providing a total of €29 billion in budgetary support, a joint effort to end global hunger; and a renewed commitment to combating climate change. Activists slammed leaders for failing to deliver on new climate pledges and encouraging investment in gas production.
The summit came amid growing concerns about the toll the war in Ukraine is taking on G7 economies. “Rising energy prices are jeopardizing security and stability in many countries,” said Scholz. In their conclusions, leaders said the conflict had “raised inflation to levels not seen in decades”.
The idea of the price cap is motivated by concerns that Moscow is benefiting from the rise in energy prices, despite the restrictions G7 members have placed on Russian energy imports.
“Some producers and speculators are making a lot of money from the current war,” French President Emmanuel Macron said after the summit.
In the final statement, leaders said they are “working to ensure that Russia does not use its position as an energy producer to profit from its aggression at the expense of vulnerable countries.”
They also agreed to look at caps on gas prices and not just oil, echoing a push by Italian Prime Minister Mario Draghi, who has backed the idea for months.
The G7 deal pledges to explore a range of approaches to the oil price cap, including options for a “possible blanket ban on all services” allowing Russian sea oil to be transported unless the price is at or below a price to be determined Upper limit consultation with international partners.
The idea is to enforce the cap by restricting the availability of European insurance for Russian shipments, as well as shipping services and US finance. Under the scheme, these services would only be available to importers complying with the price cap.
G7 leaders said their ministers would urgently review the feasibility of a price cap. However, officials have warned that the program is very complex and would require intensive work and approval from both industry and a host 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 support the basic structure,” a G7 official said of the price cap idea. “But the details have yet to be worked out.”
Another said all G7 countries agree with the “basic idea that we need to reduce revenue streams from Russian oil”.
ExxonMobil CEO Darren Woods told the Financial Times that trying to fix oil prices is a “complicated challenge.” “It’s not clear to me how that mechanism would work,” he said. “In oil and gas, the markets work very efficiently and effectively.”
Additional reporting by Tom Wilson in Brussels
