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G-7 countries are serious about the price cap for Russian oil

When Chancellor Olaf Scholz (SPD) received American President Joe Biden and the other heads of state and government in Bavaria's Schloss Elmau for the G-7 summit in June, there was already an issue: a price cap on Russian oil.

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G-7 countries are serious about the price cap for Russian oil

When Chancellor Olaf Scholz (SPD) received American President Joe Biden and the other heads of state and government in Bavaria's Schloss Elmau for the G-7 summit in June, there was already an issue: a price cap on Russian oil. The Americans pushed for it. But none of the others really wanted to tackle it.

After preliminary work in the background, the price cap is now back on the agenda at the highest political level. On Friday, the finance ministers of the G-7 countries will deal with it under the presidency of Christian Lindner (FDP). Again it is the Americans, this time in the person of Treasury Secretary Janet Yellen, who want to talk about it.

According to reports, the Americans now have Germany on their side. Proposals include forcing Russia to sell oil to big buyers like India at a much lower price in the future. The hope is that this will ease the markets. In addition, it is also intended to ensure that Russia no longer benefits from rising oil prices and can thus fill its war chest.

In order to enforce the price cap, important services for oil transport could be linked to compliance with the price cap. For example, it could be decided that Western insurance services for transports with Russian oil would not be subject to sanctions if the price cap was observed. There could be similar regulations for shipping companies whose ships transport Russian oil.

Although the EU states had already agreed on an embargo for Russian oil in the seventh sanctions package at the beginning of June, large quantities of Russian oil are still coming to Europe. Because the import ban for Russian crude oil will only come into force at the beginning of December.

During the negotiations on the embargo, which was controversial among the member states, some states had insisted on a long transition period in order to open up alternative sources of supply. For other petroleum products from Russian refineries, which are even more difficult to replace than crude oil from Russia, the import ban will not come into force until the beginning of February 2023 - nine months after it was decided.

In addition, from the beginning of December the embargo will only apply to crude oil that is delivered to the EU by ship. Exceptions are possible for oil flowing into the EU via pipelines: member states that are particularly dependent on supplies from Russia due to their geographical location and cannot organize alternative sources by the end of the year can apply for exceptions.

This affects the Central European countries of Hungary, Slovakia and the Czech Republic, which have applied for corresponding exceptions. Their oil and gas infrastructure partly dates back to Soviet times and is entirely geared towards sourcing fossil fuels from Russia. They also have no access to the sea through which tanker oil could be delivered from other producing countries.

There are also a number of smaller exceptions. For example, Bulgaria and Croatia are allowed to import Russian oil delivered by sea beyond the end of the year. However, the EU Commission emphasizes that the embargo measures, even if they look flawed, are still having an effect: Russian oil is mainly delivered to Europe by tankers, which is why the embargo, which comes into force at the beginning of December, is almost 90 percent of Russian oil exports to Europe.

Germany and Poland, which could also invoke the very generously worded pipeline exemption, have declared of their own accord that they will do without Russian oil by the end of the year.

Germany only agreed to the oil embargo under great international pressure, especially from Eastern Europe. The federal government had long resisted an oil embargo because it feared that it would harm industry and the population more than Russia. So far, these fears seem to have come true: On Wednesday, Gazprom reported record profits of almost 42 billion euros for the first half of the year.

That's already more than for the whole of 2021, in which the state-owned oil and gas giant had already made a record profit. The energy giant is benefiting from the high price of oil, which had already risen sharply last year, but which has also shot up due to the Western sanctions policy against Russia.

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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