Topline
Leaders of Group of Seven nations on Monday announced a support package for Ukraine, further sanctions against Russia and are reportedly nearing an agreement to set a price cap on Russian oil, a contentious issue as they debate ways to stave Putin’s war chest while mitigating spiraling inflation, soaring energy prices and an impending global food crisis.
U.S. President Joe Biden with other G7 leaders.
Key Facts
Leaders of the G-7—a group of the world’s seven largest economies which includes the U.S., the U.K., Canada, France, Germany, Italy and Japan—announced a suite of new measures against Moscow, including imposing higher tariffs on Russian goods, restricting Russian gold exports and imposing new sanctions on officials and organizations supporting the war effort.
The group also unveiled a new support package for Ukraine, including the provision of military hardware, using the higher tariffs on Russian goods to help Ukraine and “financial, humanitarian, military and diplomatic support” for “as long as it takes.”
The leaders are also expected to announce an agreement in principle to imposing a price cap on Russian oil, according to multiple news reports.
Crucial details of the proposed price cap—which would set an upper limit on how much revenue Russia could generate from its oil—remain unclear, including how it would work and how long it will take for leaders to agree and subsequently implement a specific plan.
Details will reportedly be resolved by G-7 nations’ finance ministers in coming weeks and months.
Crucial Quote
Ukrainian President Volodymyr Zelensky pleaded with G-7 leaders gathered at the summit to do their utmost to help end the war before the year is out. Battle conditions in winter would make it harder for Ukrainian forces to repel invaders, Zelensky explained, urging leaders to “intensify sanctions” against Russia.
Key Background
Energy, notably oil and gas, has been a major source of revenue for Russia and a key source of financing for its war in Ukraine. While an obvious target for economic sanctions, it is a major global exporter and doing so could have a significant impact on energy prices, which have soared since the war began. Many countries—including the U.S., U.K. and the EU—have targeted Russian oil and gas exports with sanctions, though Moscow has still managed to sell elsewhere, including to China and India, even benefiting from higher prices on the global market. The U.S. has lobbied for more comprehensive measures, though the issue has proven contentious among world leaders. Capping Russian oil prices has proven divisive, with Germany in particular questioning the practicalities of a price cap.
What We Don’t Know
Exactly how a price cap would work. In theory, a price cap would enable leaders to cut off a key financing stream for Russia’s war in Ukraine while also addressing soaring inflation and energy prices. In theory, a cap would severely dent Putin’s ability to make money from oil exports while keeping it on the market and therefore lowering energy prices. Any measures would need to be squared with existing sanctions and secure sufficient buy-in from countries around the world to work. Current proposals hinge on the fact that almost all oil tanker insurance is arranged through a single organization, the International Group of Protection and Indemnity Clubs. The cap would mean the London-based organization could only insure services that observe the price cap, which would otherwise be subject to sanctions.
Further Reading
Where are Russia’s barrels of oil going? (Washington Post)
Russia sanctions: Can the world cope without its oil and gas? (BBC)
Russia Defaults On Its Foreign Debt As Grace Period For Payment Expires, Reports Say (Forbes)
