G7 Countries(Group of Seven)
- G7 Countries is an intergovernmental organization of seven countries that are the world’s most industrialized and developed economies.
- G7 Countries Member: France, Germany, United Kingdom, Italy, United States of America, Canada and Japan.
- G7 Countries: Together the member countries represent 40% of global GDP and 10% of the world’s population.
- Unlike other bodies such as NATO, the G7 Countries has no legal existence, permanent secretariat or official members.
- It also has no binding impact on policy and all decisions and commitments made at G7 Countries meeting need to be ratified independently by governing bodies of member states.
G7 Countries and Prohibition
- The G7 countries and the European Union have agreed to implement a comprehensive prohibition of services from Russia. These services are the ones that enable maritime transportation of Russian-origin crude oil and petroleum products globally.
- The prohibition will not apply if these services are purchased at or below a “price cap” fixed by the G7 Countries and EU.
- The plan doesn’t include Russian gas, which Europe is still quite dependent on.
- Through this plan, the G7 Countries aim to reduce the price of oil, but not the quantity of oil that Russia sells. This will help control inflation globally and simultaneously negatively affect the Russian economy and its ability to fund the war in Ukraine.
G7 Countries Price Cap System and How it will be Enforced?
- The price cap means countries that sign up to the policy will only be permitted to purchase Russian oil and petroleum products transported via sea that are sold at or below the price cap.
- The actual price cap is not yet decided. The G7 Countries has invited all countries to provide input.
- For countries that don’t join the coalition, or buy oil higher than the cap price, would lose access to all services provided by the coalition countries. These services include insurance, currency payment, facilitation, and vessel clearances for their shipments.
- G7 Countries control nearly 90 per cent of insurers and vessels that transport oil and Russia is heavily dependent on it.
Recent Sanctions Imposed on Russia by the G7 Countries:
- Military production and supply chains: G7 Countries have agreed to align and expand sanctions to restrict Russia’s access to key industrial inputs, services, and technologies, particularly those supporting its armaments industrial base and technology sector.
- Gold: The G7 Countries has decided to ban the import of Russian gold (Gold exports are a major source of revenue for Russia in terms of their ability to transact with the global financial system).
- The G7 Countries agreed to further reduce reliance on civil nuclear and related goods from Russia.
Who all have Agreed to the G7 Countries Plan?
- Till now, all the G7 Countries have agreed to this price cap system on Russian oil.
- U.S. and EU officials have been trying to convince countries including India, China and Turkey to join the coalition or to at least support the price cap.
- The price cap is expected to be finalized when members of the G-20 countries meet in Bali in November 2022.
India’s Stance on the G7 Countries Price Cap System
- India is yet to respond to the proposed initiative. Due to reasons of national interest, India has continued to import of Russian oil at discounted prices since the Russia-Ukraine war.
- Also, Russia has also offered to provide petroleum at even lower rates than before to India.