Clockwise from left, Fumio Kishida, Prime Minister of Japan, Ursula von der Leyen, President of the European Commission, Charles Michel, President of the European Council, Mario Draghi, Prime Minister of Italy, Justin Trudeau, Prime Minister of Canada, Emmanuel Macron, Prime Minister of France, German Chancellor Olaf Scholz, US President Joe Biden and Boris Johnson, Prime Minister of the United Kingdom sit at the first working session in Castle Elmau, Germany, on Sunday, June 26, 2022. AP
A senior US official told reporters that negotiations on how to cap the amount of money the Russians can get for their key oil exports were advancing.
"We're still in final discussions with other G7 counterparts working to finalise this, but we're very close to a place where G7 leaders will have decided to urgently direct relevant ministers to develop mechanisms to set a global price cap for Russian oil," the official told reporters, speaking on condition of anonymity.
The goal of the plan is to starve the Kremlin of its "main source of cash and force down the price of Russian oil".
The White House also unveiled new measures to hamper Russia's ability to resupply the weaponry used in its onslaught against neighbouring Ukraine.
"G7 leaders will align and expand targeted sanctions to further restrict Russia's access" to Western technology that can support the Russian arms industry, the White House said.
And the US will also "aggressively target Russian defence supply chains... and limit Russia's ability to replace the military equipment it has already lost during its brutal war".
In another measure meant to punish President Vladimir Putin's Russia and increase assistance to pro-Western Ukraine, the G7 plans to turn funds raised in recently imposed trade tariffs on Russian exports into assistance for Ukraine.
President Joe Biden and other G7 leaders "will seek authority to use revenues collected by any new tariffs on Russian goods to help Ukraine and to ensure that Russia pays for the cost of its war", the senior US official told reporters.
'Direct aim at revenues'
While the West has already imposed multiple layers of sanctions on Russia in response to Putin's order to invade Ukraine in February, the targeting of the oil industry represents the highest economic stakes so far.
Energy exports are Russia's biggest revenue earner, while Western countries are among those most heavily dependent on imported oil and gas.
With soaring fuel prices at the heart of painfully high inflation in the United States and other G7 countries, Biden is especially mindful of the political risks in attacking the sector.
The senior US official said "the dual objectives of G7 leaders have been to take direct aim at revenues, particularly through energy, but also to minimise the spillovers and the impact on the G7 economies and the rest of the world".
"The G7 leaders are going to acknowledge those two objectives and also acknowledge that the path forward is to urgently direct ministers to work on achieving a price cap which can, in our judgement, best achieve both of those objectives simultaneously."
The idea of price capping Russian oil -- and also gas -- has support from Italy and also France.
It would work by countries continuing to import the energy they need from Russia but refusing to pay above a set price. This would, in theory, reduce inflation pressures back home while cutting into Russian profits.
The calculation is that Moscow would have no alternative but to agree, because it badly needs the revenues.
The French presidency has however said the measure would be "much more powerful if it came from the producing countries", and that it was necessary to work with OPEC+ and other oil producers around the world.
The United States and Canada, which are far less reliant on Russia as an energy supplier, have banned all Russian oil imports.