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G7 ready to explore caps on energy prices to curb Russian revenues

G7 members should explore ways to curb energy costs, including through possible oil and gas price caps, at a summit overshadowed by fears of a recession due to rising inflation.

Officials agreed Monday evening on summit conclusions that seek solutions to reduce Russia’s hydrocarbon revenues while minimizing the negative effects of high energy prices, officials said.

According to draft text seen by the Financial Times, leaders will examine the “feasibility” of introducing temporary energy import price caps – a reference to US-led pressure on a cap on Russia’s oil price. A G7 official previously said capitals agreed it was a good idea but “a lot of work” still needed to be done to make it a reality.

G7 leaders converged on a war in Ukraine for four months that has pushed up the price of food and hydrocarbons, raising fears of a global recession. The summit, organized by Germany in the Bavarian Alps, will conclude on Tuesday.

The leaders condemned Monday’s “horrific attack” on a shopping center in the Ukrainian city of Kremenchuk, in a statement shortly afterwards, warning that indiscriminate attacks on innocent civilians “constitute a war crime”.

“Russian President Putin and those responsible will be held accountable,” they said.

Addressed earlier in the day by Ukrainian President Volodymyr Zelenskyy via video link, the G7 leaders also said they would continue to provide Ukraine with financial, humanitarian and military support “for as long as necessary”.

“We will not rest until Russia ends its cruel and senseless war against Ukraine,” their statement said.

The move to price caps for Russian oil comes along with a French proposal to increase global oil production, an idea that emerged as G7 leaders sought ways to alleviate the looming energy crisis and ease pressure on energy-importing economies.

French officials focused on ways to moderate prices through increased oil production during talks on Monday. In particular, France wants to explore how to put production from Venezuela and Iran, both subject to US sanctions, back on the market.

US President Joe Biden has already courted the authoritarian regime of Nicolás Maduro in Venezuela in an attempt to cool the market.

The G7 conclusions underline the deep alarm among its members’ leaders about the toll the war in Ukraine is placing on their economies. They will agree that their ministers urgently evaluate the feasibility of a price cap.

Officials say the cap could be enforced through limits on the availability of European services, including insurance for Russian oil shipments.

Officials warn that the scheme is highly complex and will require intensive technical work. It could face challenges in the EU where sanctions require the agreement of all 27 member states.

“We support the basic structure,” said a G7 official of the Russian oil price ceiling. “But the details are still to be worked out.”

Another said all G7 states agreed with the “basic idea that we need to reduce revenue sources for Russian oil”.

Macron’s calls for higher production came after OPEC and its allies agreed earlier this month to accelerate oil production in July and August. The US has put pressure on the cartel’s hub, Saudi Arabia, to cool the rise in crude oil prices that hangs over the global economy.

Biden will make a trip to the Middle East in July, including a planned stop in Saudi Arabia.

Additional reporting by Victor Mallet in Paris

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