The Group of Seven (G7) nations, Australia and the European Union have agreed on a $60 per barrel price cap on Russian seaborne crude oil as part of an international campaign to curb Russia’s ability to finance its war against Ukraine through energy sales.

The EU agreed on the price on Friday after holdout Poland gave its support, paving the way for formal approval over the weekend.

The G7 and Australia said in a statement the price cap would take effect on December 5 or very soon thereafter.

“The Price Cap Coalition may also consider further action to ensure the effectiveness of the price cap,” the statement read. No details were immediately available on what further actions could be taken.

The price cap, a G7 idea, aims to reduce Russia’s income from selling oil while preventing a spike in global oil prices after an EU embargo on Russian crude takes effect on December 5.

Poland had resisted the proposed $60 level and had pushed in EU negotiations for the cap to be as low as possible to squeeze revenues to Russia and limit Moscow’s ability to finance the war.

Poland’s EU Ambassador Andrzej Sados told reporters his country had backed the EU deal, which included a mechanism to keep the oil price cap at least 5 percent below the market rate.

US officials said the deal was unprecedented and demonstrated the resolve of the coalition opposing Russia’s war on Ukraine.

After a last-minute flurry of negotiations on Friday, the EU presidency, currently held by the Czech Republic, tweeted that “ambassadors have just reached an agreement on price cap for Russian seaborne #oil”.

Why cap the price of oil?

The introduction of the cap means participating countries will only be allowed to buy oil and petroleum products transported via sea that are sold at or below the price cap.

As the most important shipping and insurance firms are based in G7 countries, the price cap would make it very difficult for Russia to sell its oil at a higher price.

European Commission President Ursula von der Leyen said the price cap would significantly reduce Russia’s revenues.

However, the chair of the Russian lower house’s foreign affairs committee told state news agency TASS that the bloc was jeopardising its own energy security.

It was also violating the laws of the market, Leonid Slutsky said.

Von der Leyen said on Twitter that “it will help us stabilise global energy prices, benefitting emerging economies around the world”, adding that the cap would be “adjustable over time” to react to market developments.

The White House welcomed the news.

“A price cap will help limit Mr Putin’s ability to profiteer off the oil market so that he can continue to fund a war machine that continues to kill innocent Ukrainians,” national security spokesman John Kirby told reporters.

Europe needed to set the discounted price that other nations will pay by Monday, when the EU embargo on Russian oil shipped by sea and a ban on insurance for those supplies takes effect.

“Crippling Russia’s energy revenues is at the core of stopping Russia’s war machine,” 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 $2bn less for Russia’s war chest.

“It is no secret that we wanted the price to be lower,” Kallas added, highlighting the differences within the EU.

“A price between 30-40 dollars is what would substantially hurt Russia. However, this is the best compromise we could get.”

The $60 figure sets the cap near the current price of Russia’s crude, which recently fell below $60 a barrel. There has been criticism that it is 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 on Friday, but could be high enough for Moscow to keep selling even while rejecting the idea of a cap.

Putin has previously warned that Russia would not sell oil under a price cap and would retaliate against nations that implement the measure.

Putin and Biden: Will they, or won’t they?

It is unlikely that Putin and US President Joe Biden will be speaking anytime soon, about oil or the war in Ukraine.

Biden was not intending to speak to Putin right now, the White House said on Friday, a day after the US leader said he was willing to talk if his Russian counterpart was looking for a way to end the war.

Biden said on Thursday that he was prepared to speak with Putin “if, in fact, there is an interest in him deciding he’s looking for a way to end the war”. But he added that Putin “hasn’t done that yet”.

Kirby told reporters on Friday that “we’re just not at a point now where talks seem to be a fruitful avenue to approach right now”.

Kremlin Spokesman Dmitry Peskov reiterated that Putin remains open to talks but the Western demand that Moscow first withdraws its troops from Ukraine is unacceptable. (Al Jazeera)

•PHOTO: Ukraine's President Volodymyr Zelenskyy shakes hands with European Commission President Ursula von der Leyen in September 2022. The EU, G7 and Australia have agreed to place a price cap on Russian oil as a means of curbing Moscow's financing of the war in Ukraine [File: Valentyn Ogirenko/Reuters]

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