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G7 Summit, Day 1: Price Caps on Russian Oil, Ban on its Gold  by Tristan Vanheuckelom

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G7 Summit, Day 1: Price Caps on Russian Oil, Ban on its Gold 

In the West’s latest double-down on its pledge to Russia’s economic degradation, G7 leaders are holding a 3-day meet. In the alpine luxury hotel of Schloss Elmau, on June 27th, the attendees agreed to impose a price cap on Russian oil.

The Group of Seven, a club of wealthy nations comprising Canada, France, Germany, Italy, Japan, the UK, and the U.S., took the opportunity to renew their vow of standing with Ukraine on all fronts “for as long as it takes.” It hopes that this use of its collective power—just short of half the world’s economic output—will not only hit Russia’s war chest, but lower energy prices as well. Their latest sanction to denude Russia of capital needed to further its military operations in Ukraine follows a U.S. announcement, made over the weekend, that the G7 will also impose an import ban on Russian gold

In an address by video call, Ukrainian President Volodymyr Zelensky made his usual plea for more heavy weapons and air defense systems to resist the Russian onslaught. The U.S. is already preparing such a shipment, as confirmed by National Security Advisor Jake Sullivan during a press meeting on June 27th, who said that it is “in the process of finalizing a package that includes advanced air defense capabilities.”

But the war can not go on indefinitely, as the G7 well realize. At some point, a peace settlement will be drawn up. In that eventuality, they are promising security commitments while stressing that it is up to Kyiv to request and negotiate any peace deal with Russia.

The G7 is at pains to present itself as a strong, enduring alliance in full backing of Ukraine. To that end, it pledges yet another massive sum to Ukraine, this time to the tune of $29.5 billion (€27,86 billion). It hereby risks a massive PR problem however, as at home, record-high inflation and looming energy shortages worry these nations’ citizenry, who are not apparent beneficiaries of the strategy being followed.

Whether the very continuance of that strategy makes even logical sense at this point, is another matter. For one, a price cap on oil means all other nations need to follow suit. What is more likely is that the BRIC nations (which, besides Russia, comprise Brazil, India and China), will pay Moscow any figure to secure their energy needs. As such, the price cap might prove empty rhetoric, while revealing that the G7 is not one to dictate terms—at least, not anymore.

A big test for the G7 is India. A rich market not only for Russian oil, gas, and coal but military materials as well, it has longstanding ties with Moscow which require a careful balancing of relations with the West. Yet, compared with the former, the West has not much energy to offer—a consideration that might prove the overriding one in New Delhi. 

Even if the G7 countries somehow manage to convince non-G7 ones to buy Russian oil only under a certain price point, Russia has two economic warfare tools at its disposal for retaliation. A sudden cut of all oil or gas can serve as a severe punishment for the EU in particular, especially if this is done before all 27 EU member states have reached an agreement to put a stop to these imports, while providing alternatives. 

As for the ban on gold (Russia’s largest non-energy export), this would likely be very limited in its effectiveness. While U.S. President Joe Biden tweeted that Russian gold “is a major export that rakes in tens of billions of dollars,” that is only a fraction of the profit the country makes from its exports. During the first 100 days of the war, Russia earned nearly $100 billion from its oil and gas, while Bloomberg Economics predicted the country is likely to bring in $285 billion in oil and gas revenues this year alone—20% more than the previous one. Such a ban would therefore do little more than ensure that India and China will scoop it up, while pushing global prices higher.

India’s Prime Minister Narendra Modi is one of five leaders of guest nations joining the G7. On the second day of the G7 summit, their talks will center on climate change, energy, health, food security, and gender equality.

Tristan Vanheuckelom writes on film, literature, and comics for various Dutch publications. He is an avid student of history, political theory, and religion, and is a News Writer at The European Conservative.