The Group of Seven (G7) and Australia have joined the European Union in adopting a $60-per-barrel price cap on Russian oil, a move that the countries say will help achieve the goal of restricting Russia's primary source of funding for the war in Ukraine while preventing a spike in global prices.
EU ambassadors reached a deal for the $60-per-barrel price cap on Russian seaborne oil earlier on December 2 after breaking a deadlock over the price, with some countries saying it was not low enough.
The decision must still be approved by EU members but is expected to go through. Europe needed to set the cap by December 5, when an EU embargo on Russian oil shipped by sea and a ban on insurance for those supplies take effect.
U.S. Treasury Secretary Janet Yellen said in a statement that the price cap, which was led by the G7, "will help us achieve our goal of restricting [Russian President Vladimir] Putin's primary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies."
The price cap "will immediately cut into Putin's most important source of revenue," Yellen said.
The announcement is the culmination of months of effort by a coalition of countries, and Yellen commended the "hard work of our partners in achieving this outcome."
The agreement comes after a last-minute flurry of negotiations that saw Poland holding up the agreement as it sought to set the cap as low as possible. Following more than 24 hours of deliberations, Warsaw finally relented late on December 2.
A joint G7 coalition statement said the group was "prepared to review and adjust the maximum price as appropriate," taking into account market developments and potential impacts on coalition members and low and middle-income countries.
The price cap will work by prohibiting shippers and insurance companies from handling cargoes of Russian crude unless it is sold at or below the price cap.
The world's key shipping and insurance firms are based in G7 countries, giving them leverage to set the price cap and make it difficult for Moscow to sell its oil for a higher price.