MITTENWALD, Germany – Leaders from the Group of Seven wealthiest democracies said they would “urgently” look at ways to introduce price caps on Russian oil and gas to hurt Moscow’s ability to finance its war in Ukraine, but they stopped short of new energy sanctions.
Russia’s ongoing assault on Ukraine and the impact on food and energy supplies dominated discussions at Schloss Elmau, a castle hotel nestled against the dramatic backdrop of southern Germany’s Bavarian Alps. President Biden then flew on to Madrid where he and other NATO heads of state and government are gathering for another three-day summit focused on military support for Ukraine and the alliance’s longer-term strategy.
In Germany, the G-7 leaders agreed to contribute $4.5 billion to address global food insecurity, with more than half the money coming from the United States. As promised on Sunday, the U.S. Treasury said it would introduce sanctions on Russian gold, the country’s biggest export outside the energy sector, action that would be joined by Britain, Japan and Canada. European officials said they need to consult with other members of the European Union before making a similar move.
“We all agree that President Putin cannot win this war,” German Chancellor Olaf Scholz said in his closing remarks on Tuesday. “We will keep the political and economic costs for Putin and his regime high, and further increase them.”
Scholz said that decisiveness was important in such a challenging, uncertain period. After days of negotiations, the final communique did not include any new energy sanctions but said that G-7 countries would instruct ministers to look for ways to impose caps on the price of Russian oil and gas.
In addition to hurting Russia financially, the caps are seen as a way to bring down surging energy prices globally. Scholz invited “like-minded countries to consider joining us in our actions.”
French President Emmanuel Macron said such measures need to be worked through on a technical level before they can be implemented. He called on energy purchasers to better coordinate.
One European official briefed on the talks said that more concrete steps had not been expected since the G-7 is not a “buyers’ club” and details also would have to be discussed by the European Union. But the political backing for the new idea of price capping was an important signal, he said, declining to be named to discuss the private negotiations.
At the moment, some countries that are arming and backing Ukraine in its defense against Russia are simultaneously sending billions of dollars to Moscow in energy payments.
Surging energy prices have blunted the financial impact of countries cutting their imports from Russia. Moscow earned $66.5 billion from fossil fuel exports during the first two months of the war, according to a study published by the Center for Research on Energy and Clean Air, with Germany alone paying more than $9.5 billion.
“We reaffirm our commitment to phase out our dependency on Russian energy,” the final communique read. “In addition, we will explore further measures to prevent Russia from profiting from its war of aggression.”
The oil price cap, which was floated by the United States ahead of the meeting, is complicated by the fact that oil is sold on the open market and Russia could look elsewhere for buyers. Negotiators have been considering ways to enforce the cap though Western-dominated insurance and shipping industries, hoping to leverage them to make it difficult to transport Russian oil that has been purchased outside the cap.
G-7 leaders will consider a ban on services that “enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultation with international partners.”
A cap on natural gas prices is considered easier to implement because the pipeline infrastructure used to move it means that Russia cannot sell gas earmarked for Europe to alternative buyers. On gas, leaders agreed to “seek to develop solutions that meet our objectives of reducing Russian revenues from hydrocarbons,” the text said.
The U.S. Treasury also said it would sanction “70 entities, many of which are critical to the Russian Federation’s defense industrial base, including State Corporation Rostec, the cornerstone of Russia’s defense, industrial, technology, and manufacturing sectors, as well as 29 Russian individuals.”
Some observers said that Ukraine’s allies are still falling short at a critical time in the war. Ukrainian President Volodymyr Zelensky joined the summit by video link on Monday, with a plea for more modern heavy weaponry that might turn the tide against Russian advances in his country’s east.
Economic penalties and international financing of reconstruction efforts are of limited assistance when Ukraine is living “hand to mouth” when it comes to military supplies, said Gustav Gressel, senior fellow at the European Council for Foreign Relations.
“Of course Ukraine needs funding to be able to carry on,” he said. “But this only makes sense if you give Ukraine a chance to survive militarily,” he said, adding that arms aren’t being delivered quickly enough.
Military support for Ukraine will be a key topic for the next several days in Madrid, where NATO leaders and officials started meeting Tuesday. They will discuss a more responsive force model for the alliance, debate plans to bolster its eastern flank and release a new strategy document, diplomats said.
That document will “describe in stark terms the threat that Russia poses and the way in which it has shattered peace in Europe,” said National Security Advisor Jake Sullivan. It will also describe in a “clear-eyed way” the threats posed by China, he said. Diplomats said the exact language to be used is still being debated.
The gathering follows NATO Secretary General Jens Stoltenberg’s announcement that the number of high-readiness alliance forces will increase sharply – to more than 300,000 troops from 40,000 – in response to Russia’s attack on Ukraine. The expansion is part of what Stoltenberg called the “biggest overhaul of our collective defense and deterrence since the Cold War.”
Sullivan noted Biden’s position before the invasion. “The president said before the war started that if Putin invaded Ukraine, the United States and NATO would enhance its force posture on the eastern flank, not just for the duration of the crisis but to address the long-term change in the strategic reality that would present,” he said. “And in this summit you will see the alliance follow through on that commitment and the United States follow through on that commitment.”
Biden will announce that six U.S. destroyers soon will be based at Rota, Spain, up from four, Sullivan said.
For the first time, the leaders of Australia, New Zealand, South Korea and Japan will attend the summit. Also participating will be Sweden and Finland, close NATO partners who remained officially militarily nonaligned until Russia’s unprovoked invasion of Ukraine pushed them closer to the alliance. Stockholm and Helsinki applied to join the alliance last month, only to have Turkey block the start of the accession process, citing opposition to Sweden’s stance on Kurdish separatist groups.
Weeks of diplomacy have yet to resolve that standoff, although NATO officials and diplomats insist they are confident things will ultimately move forward. Swedish Prime Minister Magdalena Andersson, Finnish President Sauli Niinisto and Turkish President Recep Tayyip Erdogan will meet in Madrid, according to Finnish officials.
Sullivan said Stoltenberg would take the lead in trying to break the impasse. He said the United States believes that Finland and Sweden “have taken significant steps forward in terms of addressing Turkey’s concerns.”
The summit will be closely watched not only for news on money and weapons to Ukraine, but as a sign of Western resolve as the war enters its fifth month.
Russia’s full-scale invasion has reinvigorated transatlantic ties in many ways, with the United States and European allies working closely on sanctions and military support for Ukraine. But with every passing month, key issues get more complicated. The question of whether and how to pursue a peace deal, for instance, is becoming divisive within the alliance.
Retired U.S. Army Lt. Gen. Ben Hodges, a former commander of U.S. Army Europe, said NATO’s challenge is to show Russia that it has not lost momentum. “The Russians are just so confident that we cannot stay together, that we can’t sustain what we are doing through a long hot summer,” he said.
Because of this, Hodges added, allies are focused on sending a message to Russia that NATO has “an unmistakable commitment to making sure that Ukraine wins, not just survives.”
(c) 2022, The Washington Post · Loveday Morris, Emily Rauhala, Rick Noack, Matt Viser
