G-7 leaders agree to set price cap on Russian oil

WASHINGTON — Financial officials representing the world's wealthiest democracies agreed to set a cap on the price of Russian oil on Friday, a key development in the West's economic campaign against the country amid its war with Ukraine. 

Top financial ministers representing the Group of Seven — the United States, Canada, France, Germany, Japan, Italy and the United Kingdom — announced a deal had been made but that precise details would need to be ironed out in the coming weeks. 

The proposal is designed to stabilize global energy prices, which have swung wildly and helped fuel global inflation in the more than six months since the Russian Federation invaded Ukraine. In a joint statement, the G-7 financial officials said the eventual price would be "set at a level based on a range of technical inputs and will be decided by the full coalition in advance of implementation in each jurisdiction." 

Bloomberg News

In a separate statement published Friday morning, U.S. Treasury Secretary Janet Yellen called the initial agreement a "critical step forward in achieving our dual goals of putting downward pressure on global energy prices while denying Putin revenue to fund his brutal war in Ukraine."

"This price cap is one of the most powerful tools we have to fight inflation and protect workers and businesses in the United States and globally from future price spikes caused by global disruptions," Yellen said. "Today's action will help deliver a major blow for Russian finances and will both hinder Russia's ability to fight its unprovoked war in Ukraine and hasten the deterioration of the Russian economy." 

Russian officials have said the country will stop selling oil to countries that agree to any price caps and that the move from the G-7 would only further destabilize energy markets. 

International attention will now shift to Europe, which heavily relied on Russian energy exports in the years leading up to the Ukrainian invasion. In June, the European Union agreed to sanctions against Russia that would ban the import of oil by sea. Those sanctions are expected to go into effect by year end.  

In a press conference Thursday, White House press secretary Karine Jean-Pierre declined to say whether the U.S. would continue its total ban on Russian oil imports if G-7 leaders agreed to a price cap. 

The Treasury Department has been walking a fine line in recent months by trying to isolate Russia from the global financial system without driving up already high prices for oil and wheat — Russia's chief exports. The Biden administration announced a ban on the import of Russian oil to the United States in March, and European allies have been working to reduce their reliance on Russian energy imports since Russia's invasion of Ukraine in February. 

Yellen has emphasized the importance of building coalitions with allies against Russia, and in large part the coalition siding with Ukraine in its struggle has held together. There are fears among some analysts, however, that the effect of Russia's isolation could be a greater balkanization of global trade.