G7 agrees to explore cap on Russian oil price

GERMANY: The Group of Seven economic powers have agreed to explore imposing a ban on transporting Russian oil that has been sold above a certain price, they said on Tuesday, aiming to hit Russian President Vladimir Putin's war chest.

The war in Ukraine and its dramatic economic fallout, in particular soaring food and energy inflation, dominated this year's summit of the group of rich democracies at a castle resort in the Bavarian Alps. An oil price cap would ratchet up existing Western pressure on Russia from sanctions, which German Chancellor Olaf Scholz insisted would stay until Putin accepted failure in Ukraine.

"There is only one way out: for Putin to accept that his plans in Ukraine will not succeed," Scholz told a closing news conference at the three-day G7 summit he hosted. The idea behind the cap is to tie financial services, insurance and the shipping of oil cargoes to a price ceiling. So if a shipper or importer wanted these services, they would have to commit to the Russian oil being sold for a set maximum price.

"We invite all like-minded countries to consider joining us in our actions," the G7 leaders said in the communique. The G7 is looking at the price ceiling as a way to prevent Moscow profiting from its invasion of Ukraine, which has sharply raised energy prices, taking the sting out of Western efforts to reduce imports of Russian oil and gas.

Russian oil export revenues climbed in May even as volumes fell, the International Energy Agency said in its June monthly report. A cap on how much other countries pay Russia for oil would squeeze the "resources that (Putin) has to wage war and secondly increase stability and the security of supply in global oil markets," a senior U.S. administration official said on Tuesday.

The Kremlin said on Tuesday Russian gas giant Gazprom could seek to change the terms of its delivery contracts if Western nations implemented a price cap on Russian gas. The war, which has killed thousands and displaced millions, has entered its fifth month with no signs of abating.

Firefighters and soldiers searched on Tuesday for survivors in the rubble of a shopping mall in central Ukraine struck by a Russian missile. French President Emmanuel Macron said the strike on the mall was a "war crime". Moscow denied hitting the mall with missiles.

"Russia cannot and must not win this war," he said at the summit, adding that France would support Ukraine for as long as necessary.

G7 nations want to crank up pressure on Russia without stoking already soaring inflation that is causing strains at home and savaging developing nations. There is a "real risk" of multiple famines this year as the Ukraine war has compounded the negative impact of climate crises and the COVID-19 pandemic on food security, United Nations chief Antonio Guterres said last week.

G7 leaders pledged $4.5 billion on Tuesday to fight global hunger, according to a G7 statement. The United States will provide over half of that sum, which would go to efforts to fight hunger in 47 countries and fund regional organisations, a senior U.S. official said.

Some non-governmental organisations criticised the sum as far too little. The United Nations World Food Programme says it needs $22.2 billion this year. "Faced with the worst hunger crisis in a generation, the G7 have simply failed to take the action that is needed," said Max Lawson, Head of Inequality Policy at Oxfam. "Many millions will face terrible hunger and starvation as a result.”

The G7 is attempting to rally emerging countries, many with close ties to Russia, to oppose Putin's invasion of Ukraine, and invited five major middle-and-low income democracies to the summit to win them over. Some are more concerned with the impact of soaring food prices at home, blaming Western sanctions for the shortages, not Russia's invasion of Ukraine, one of the world's top grain producers, and its blockade of Ukrainian ports.

Asked if G7 leaders had found a way to let Ukraine export its grain, British Prime Minister Boris Johnson said on Tuesday: "We're working on it, we're all working on it". G7 leaders also committed on Tuesday to creating an international "Climate Club" to forge cooperation on climate change and made pledges on decarbonising industrial sectors.