Oil price cap could strike Russia's war chest — if enforced
GARMISCH-PARTENKIRCHEN, Germany (AP) — Leaders of the world’s biggest developed economies are weighing a cap on the price of Russian oil meant to strike at the main pillar of the Kremlin's finances following its invasion of Ukraine — and to limit the havoc that high energy prices are wreaking worldwide.
Details haven't been agreed at the Group of Seven summit in Elmau, Germany, but the basic idea would be to tie the price cap to the services that make trading oil possible. For instance, insurers would be barred from dealing with shipments that are above the cap, wherever it winds up being set.
Because such service providers are largely based in the European Union and United Kingdom, Russia would be expected to face difficulty finding large-scale workarounds.
Limiting the price would reduce the Kremlin's income from oil — at the start of the war, it was about $450 million per day from Europe alone. The cap also would limit the impact of higher oil prices on inflation in consuming countries, with the cost of gasoline and diesel squeezing consumers and businesses.
But much would depend on whether Asian countries like India would go along with the price cap. A key question is enforcement, and European officials are also cautious about side effects.
“We want to go more into the details. ... We want to make sure that the goal is to target Russia and not to make our life more difficult,” said Charles Michel, head of the European Union’s 27-member council of governments. “We need to have a clear common understanding about what are the direct effects and what could be the collateral consequences.”
The EU has agreed to phase out the 90% of Russian oil that comes by ship by the end of the year but is chagrined that it is still paying into the Kremlin's war chest. EU countries,...
