WASHINGTON (AP) 鈥� The Group of Seven nations and Australia joined the European Union on Friday in adopting a $60-per-barrel price cap on Russian oil, a key step as Western sanctions aim to to prevent price spikes and starve President Vladimir Putin of funding for his .
Europe needed to set the discounted price that other nations will pay by Monday, when an and a ban on insurance for those supplies take effect. The price cap, which was , aims to prevent a sudden loss of Russian oil to the world that could lead to a new and further fuel inflation.
U.S. Treasury Secretary Janet Yellen said in a statement that the agreement will help restrict Putin鈥檚 鈥減rimary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies.鈥�
The agreement comes after a last-minute flurry of negotiations. Poland long held up an EU agreement, seeking to set the cap as low as possible. Following more than 24 hours of deliberations, when other EU nations had signaled they would back the deal, Warsaw finally relented late Friday.
A joint G-7 coalition statement released Friday states that the group is 鈥減repared to review and adjust the maximum price as appropriate," taking into account market developments and potential impacts on coalition members and low and middle-income countries.
鈥淐rippling Russia鈥檚 energy revenues is at the core of stopping Russia鈥檚 war machine,鈥� Estonian Prime Minister Kaja Kallas said, adding that she was happy the cap was pushed down a few extra dollars from earlier proposals. She said every dollar the cap was reduced amounted to $2 billion less for Russia's war chest.
鈥淚t is no secret that we wanted the price to be lower," Kallas added, highlighting the differences within the EU. 鈥淎 price between 30-40 dollars is what would substantially hurt Russia. However, this is the best compromise we could get.鈥�
The $60 figure sets the cap near the current price of Russia鈥檚 crude, which recently fell below $60 a barrel. Some criticize that as not low enough to cut into one of Russia's main sources of income. It is still a big discount to international benchmark Brent, which slid to $85.48 a barrel Friday, but could be high enough for Moscow to keep selling even while rejecting the idea of a cap.
There is a big risk to the global oil market of losing large amounts of crude from the world鈥檚 No. 2 producer. It could worldwide, which has stirred and leaders in other nations. Europe is already , with governments , while developing nations are even more .
But the West has faced increasing pressure to target 鈥� oil 鈥� to slash the funds flowing into Putin's war chest and as the war in Ukraine drags into a ninth month. The after demand rebounded from the pandemic and then the invasion of Ukraine unsettled energy markets, feeding Russia's coffers.
U.S. National Security Council spokesman John Kirby told reporters Friday that 鈥渢he cap itself will have the desired effect on limiting Mr. Putin鈥檚 ability to profit off of oil sales and limit his ability to continue to use that money to fund his war machine.鈥�
More uncertainty is ahead, however. and a slowing global economy could mean less thirst for oil. That is what OPEC and allied oil-producing countries, including Russia, pointed to in . The OPEC+ alliance is scheduled to meet again Sunday.
That competes with the EU embargo that could take more oil supplies off the market, raising fears of a supply squeeze and higher prices. Russia exports roughly 5 million barrels of oil a day.
Putin has said he would not sell oil under a price cap and would retaliate against nations that implement the measure. However, Russia has already and other Asian countries at discounted prices because Western customers have avoided it even before the EU embargo.
Most insurers are located in the EU or the United Kingdom and could be required to participate in the price cap.
Russia also could sell oil off the books by using 鈥渄ark fleet鈥� tankers with obscure ownership. Oil could be transferred from one ship to another and mixed with oil of similar quality to disguise its origin.
Even under those circumstances, the cap would make it 鈥渕ore costly, time-consuming and cumbersome鈥� for Russia to sell oil around the restrictions, said Maria Shagina, a sanctions expert at the International Institute for Strategic Studies in Berlin.
Robin Brooks, chief economist at the Institute of International Finance in Washington, said the price cap should have been implemented when oil was .
鈥淪ince then, obviously oil prices have fallen and global recession is a real thing,鈥� he said. 鈥淭he reality is that it is unlikely to be binding given where oil prices are now.鈥�
European leaders touted their work on the price cap, a .
鈥淭he EU agreement on an oil price cap, coordinated with G7 and others, will reduce Russia鈥檚 revenues significantly,鈥� said Ursula von der Leyen, president of the European Commission, the EU's executive arm. 鈥淚t will help us stabilize global energy prices, benefiting emerging economies around the world.鈥�
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Casert reported from Brussels and McHugh from Frankfurt, Germany. AP reporter Aamer Madhani contributed from Washington.
Raf Casert, Fatima Hussein And David Mchugh, The Associated Press
