G7 and Australia move forward with price cap on Russian oil
December 2, 2022 - Ottawa, Canada - Department of Finance Canada
Today, Canada, G7 partners and Australia are moving forward with a plan to weaken Putin’s ability to fund his illegal war against Ukraine by imposing a maximum price cap on seaborne Russian-origin crude oil.
As of December 5, 2022, the maximum price for seaborne Russian-origin crude oil will be US$60 per barrel. Buyers who do not abide by the price cap will not be able to obtain services, like shippers’ insurance, from companies in any of the Coalition countries (G7 partners and Australia).
This price cap mechanism has been carefully designed to reduce Russian revenues, and thus limit Russia’s ability to fund its war against Ukraine, while recognizing the supply chain limitations of global energy markets and minimizing negative economic spillovers. The mechanism also allows for adjustments so that the price cap could be shifted down.
Canada’s ban on imports of Russian oil—which came into force on March 10, 2022—remains in effect.
In addition to the price cap, signatories, including countries of the European Union, also reaffirmed their intent to phase out Russian oil and petroleum products from their domestic markets. This is a significant further expansion of the sanctions imposed since February 2022.
After the coming into force date, the Coalition will enforce the crude oil price cap and monitor its impact. It will also adjust it as appropriate by, for example, allowing the price cap to reflect downward changes to the average market price for Russian oil. The Coalition is also working on imposing a similar price cap in early 2023 on Russian-origin petroleum products beyond crude oil.
“This coordinated effort by Canada and our allies is about continually ramping up the pressure on Putin and doing everything we can – as we have since February – to cut off or limit the various revenue streams that the Kremlin uses to fund its barbaric war against Ukraine. Cutting off its central bank reserves was one such step. Limiting its oil revenues is another important step we must take together. We can and must help Ukraine win this war.”
- The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance
The announcement delivers on a commitment by G7 Leaders at their Summit in Elmau to prevent Russia from profiting from its war of aggression by phasing out dependency on Russian energy and introducing price caps to limit the flow of oil revenues into Russia’s war chest.
According to the International Energy Agency, oil and gas revenues made up about 45 per cent of Russia’s federal budget revenues in 2021.
Canada is a net exporter of crude oil, meaning it exports more than it imports each year. Canada does not import crude oil from Russia.
The Government of Canada has already disbursed $2 billion in direct financial assistance to Ukraine so far in 2022, and committed an additional $500 million through the Ukraine Sovereignty Bond. Canada has also committed more than $2.5 billion in military, humanitarian, and other assistance to Ukraine, bringing Canada’s total commitment to more than $5 billion.
On March 24, 2022, the Government of Canada announced that, in response to requests from our allies to address supply shortages resulting from Putin’s illegal war, Canadian industry would incrementally increase oil and gas exports in 2022 by up to 300,000 barrels per day (200,000 bbl/d of oil and up to 100,000 BOE/d of natural gas), with the intention of displacing Russian oil and gas while not increasing global emissions.
Media may contact:
Office of the Deputy Prime Minister and Minister of Finance
Department of Finance Canada
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