Cape Town – In a bid to curb the rising energy costs, G7 leaders have agreed to impose price caps on Russian global oil exports which will come into effect on December 5.
Sputnik News agency reported that a cap for refined oil products coming from Russia will also be implemented from February 5, 2023.
Since the start of the Russia-Ukraine conflict earlier this year, a number of sanctions have been imposed on Russia which sent food and energy prices soaring and at the same time, triggered record-high inflation for some countries.
A former merchant banker and economic historian, Martin Hutchinson, said the oil price cap could have a similar counter-productive impact as the previous sanctions on Russia.
“So far sanctions on Russia have been hell for innocent Western investors, whose Russian assets have been frozen, but have had zero effect on Russia,” Hutchinson said.
He added that the G7 states had no control over the policies of heavy oil consumers such as China and India, where the oil will ultimately flow. Meanwhile, exports from major energy producers of the Middle East which will flow to Europe and the US will not come at a cheaper price.
According to the BBC, the G7 finance ministers said during their virtual meeting at the weekend that the price cap was “specifically designed” to reduce Russian revenues.
Furthermore, analysts say for the price cap to work, other nations outside of the G7 would also need to take part, more specifically countries such as India and China.
“China and India are already getting cheaper – cheap enough – oil,” Bill O’Grady, of Confluence Investment, told Al Jazeera.
“I don’t think that the Chinese or the Indians or the Turkish will go on with the G7 plan.”
IOL