The seriousness of the efforts of the G7 and the EU to reduce Russia's economic revenues from oil exports is aimed at limiting its ability to finance the military conflict in Ukraine. By revising the price limit and tightening sanctions, Western countries are trying to increase pressure on the Kremlin and force it to peace talks. At the same time, the importance of international cooperation and supervision for the effective implementation of these measures is emphasized. These steps show that economic sanctions remain a key instrument in the West's strategy for resolving the crisis.
The Group of Seven (G7) countries are currently discussing the possibility of revising the price cap for Russian oil in order to limit the Kremlin’s access to petrodollars and contribute to an end to the war in Ukraine. This is stated in a draft G7 statement, as reported by Bloomberg. The aim is to increase the costs of the war for Russia and force the country to start “reasonable” peace negotiations.
The G7 is expected to instruct its finance ministers to review the current price cap for Russian crude, which is $60 per barrel. However, this proposal is still under discussion and could undergo significant changes during the negotiations.
The text of the draft statement also mentions the possibility of international supervision of the implementation of the restrictions, writes Bloomberg. In the coming days, a statement will follow in which the G7 will advocate for a "just peace" in Ukraine, based on common sense and strong security guarantees. In addition, the allies will emphasize the importance of Ukraine's participation in possible peace negotiations, which will ensure its ability to continue with Euro-Atlantic integration.
At present, it is unclear exactly how the price caps for Russian crude oil will be adjusted. One option is to reduce the price or tighten enforcement of existing limits.
The drop in oil revenues could significantly reduce the Kremlin's financial power and limit its ability to finance the military conflict in Ukraine, which is the largest item in Russia's budget this year. Russia is preparing to increase defense and internal security spending, planning record spending of more than 13 trillion rubles in 2025.
Despite the current high oil prices, a drop below $60 per barrel could cause serious economic problems for Russia, as stated in the latest report of the Central Bank of the Russian Federation on financial stability.
Let us mention that in December, OPEC+ decided to postpone the planned increase in oil production, which was supposed to begin in January, and an increase in production of 180.000 barrels per day was planned, which was supposed to begin in the new year 2025. Representatives of the cartel explained this by saying that current oil prices are too low to cover the budget needs of most members of the organization.
They believe this could limit Moscow's revenues without causing major market shocks.
These efforts by the G7 and the EU demonstrate that the common goal is to reduce economic pressure on Russia and ensure that the war in Ukraine ends in a just and lasting manner.