Leaders of the Group of 7 nations are close to an agreement in principle to begin the process of potentially imposing price caps on Russian oil and are set to impose other new economic penalties on Moscow to support Ukraine, Biden administration officials said on Monday.

The agreement on oil, which treasury secretary Janet L. Yellen has pushed aggressively in recent weeks, would aim to limit how much money Russia can earn from each barrel of oil it sells on the global market, reducing the fossil fuel revenues Russia is relying on to finance its war effort.

It would also attempt to stabilise global oil markets — and hopefully bring down prices — by ensuring that Russian oil continues to flow to consumers worldwide even as wealthy democracies increasingly impose import bans on Russian oil in their countries.

Even with an agreement in principle, countries’ finance ministers would be left to work out details of how the plan would be implemented. A final agreement would also require complex discussions that would likely need to include private companies, like insurers and large financial firms, along with countries outside Europe and the United States that import oil from Russia.

Still, US officials expressed cautious optimism on Monday that negotiators could work rapidly to set the details of the plan once G7 leaders finalise an agreement in principle.

“I think it can be done relatively quickly,” Jake Sullivan, President Biden’s national security adviser, told reporters at the summit. The US has already introduced a ban on Russian oil, and European allies are moving in the coming months to prohibit most Russian oil and to reduce gas imports by the end of the year.

Any price caps would not interfere with existing bans. But American officials do not want those bans to eventually force millions of barrels of Russian oil a day off the global market, which could drive up already high global prices and further fuel inflation for American consumers and their counterparts around the world.

Instead, they are hoping to leverage the fact that western banking, insurance and shipping companies facilitate much of Russia’s oil exports to the rest of the world — and to use those industries as a choke point to drive down the price of Russian oil.

While Russia’s oil exports have fallen precipitously under the sanctions, its revenues from oil sales have been on the rise, a function of soaring fuel prices. And consumers around the world have faced mounting pain at the fuel pump.

That combination has left G7 leaders looking for ways to both reduce Russian revenues and relieve energy price pressures.

New York Times News Service