G7 not big enough to dictate Russian oil price – World Bank

The measure requires broader participation by other countries, the financial institution says

The proposed plan by the Group of Seven (G7) to impose a maximum price restriction on the purchases of Russian oil could work only if major emerging markets and developing countries join the scheme, the World Bank has said.

In its oil market outlook, issued on Wednesday, the bank highlighted the associated risks. It wrote that the upside risks are dominated by supply issues, including the extent to which Russia’s exports are impacted by new trade measures.

“The proposed G7 oil price cap could affect the flow of oil from Russia, but it is an untested mechanism and would need the participation of large emerging markets and developing economies to achieve its objectives,” the report said.

It added that while significant disruption to Russia’s exports may occur in the short term as trade routes are disrupted, “market participants may find ways to circumvent the sanctions, as has often occurred with other sanction episodes.”

The Group of Seven leading economies – the US, Canada, France, Germany, Italy, the UK, and Japan – agreed last month to enforce a price ceiling on Russian oil in a bid to curb the country’s revenue from energy exports. The price limit hasn’t yet been decided.  

READ MORE: IEA warns of ‘first truly global energy crisis’

According to the plan, banking, insurance and shipping firms will be banned from providing services to Russian companies that sell oil at a price above the set limit. December 5 also marks the deadline for the EU to ban all imports of Russian seaborne crude.

Moscow has said it will not export oil to countries participating in the price cap.

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