G7 agrees to cap Russian oil

G7 nations have agreed to impose a cap on the price of Russian oil imports, despite Russian threats to cut off cold turkey any country that tries to mess with its energy business.

Driving the news: The G7 announced its intention to institute a price cap back in June as a means to cut Russia’s oil profits, hurt its war efforts, and lower global energy prices—now they are making good on that plan with a formal agreement.

  • The projected start date for the price cap is now December 5, the same day that the EU will begin its partial ban on Russian oil imports.
  • To enforce the cap, London-based ship insurers (which cover about 95% of the world's oil tankers) would not be permitted to insure any vessels carrying oil sold above the cap price. 

Why it matters: Despite the coordinated efforts of Western nations, Russia has still been raking in money to fuel its war machine thanks to its energy exports. A global ceiling on the price of Russian oil could put a stop to this.

What’s next: The G7 said the price the cap will be set at is still TBD, but would be determined by a range of technical inputs and consultations with other countries who might want to join.

  • Officials are crossing their fingers that China and India in particular might want to get in on the price-fixing action, as the plan will be significantly less effective if Russia can still sell at full price to those markets.  

Yes, but: Analysts have pointed out that there are ways Russia could get around the cap by using tankers insured by non-Western brokers to sell oil to non-G7 buyers.

  • Russia has also said it won’t sell oil to any country that observes the price cap anyway—whether or not it can make good on this threat will likely depend on how many countries agree to join in.

Meanwhile, state-owned energy giant Gazprom announced the Nord Stream 1 gas pipeline—a key supplier of natural gas for Europe—would not re-open today as expected due to (they claim) maintenance problems.