G7 and Australia agreed to impose a ceiling on oil prices from Russia at $60 per barrel

Australia and the G7 countries (G7, includes Great Britain, Germany, Italy, USA, Canada, France, Japan), following the EU member states, agreed to set a price ceiling for Russian oil in the amount of $60 per barrel, follows from statements on the US Department of the Treasury website.

The Price Cap Coalition (EU, Australia and G7) will impose restrictions on Russian oil next week, including a ban on shipping insurance. The measures will not work if buyers purchase oil from Russia at a price of $60 per barrel or lower, and importers will thus retain access to a range of services from Western countries, the ministry explained.

The coalition states have agreed on an oil price ceiling to keep Russian energy supplies at a reduced price, the statement said. The US Treasury calls this mechanism an important tool to limit Moscow’s income, which is used to finance a special operation in Ukraine. At the same time, as noted, the price limit of $60 per barrel is set high enough for Russia to have an economic incentive to continue selling oil on world markets. The agreed price level is above the cost of oil and is comparable to the prices at which the Russian Federation traded before the outbreak of hostilities in Ukraine, the statement said.

After setting the price ceiling, Russia will be able to rely on service providers outside the G7, but such cooperation will be “more expensive and less reliable,” according to the US.

“Given these constraints, reducing sales would not be in Russia’s economic interest, especially as it would mean reducing sales to key emerging markets, including Russia’s allies,” the statement said.

On December 2, the European Union also reached an agreement on the introduction of a price ceiling for oil from Russia at $60 per barrel, Poland’s permanent representative to the EU, Andrzej Sados, said earlier. Poland has been the only EU country that has so far blocked the introduction of an oil price ceiling. The fact that the EU countries are discussing limiting the price of Russian oil at $60 per barrel was reported by Bloomberg on November 30. Last week, EU countries failed to agree on a price ceiling due to disagreements between the countries. Bloomberg wrote that the EC proposed a ceiling of $65 per barrel, but this restriction seemed too lenient to Poland.

Earlier, the Russian authorities have repeatedly said that they will not supply energy resources to countries that join the price ceiling for oil and gas from the Russian Federation. “We will not act to our own detriment,” Russian President Vladimir Putin said in October.

Deputy Prime Minister Alexander Novak said that the Russian side would consider the introduction of an oil price ceiling an unacceptable step, regardless of its size, and would work only on market conditions.