The G7 summit is scheduled to end on the 28th and is expected to announce the latest sanctions against Russia. Will the G7 give Russia a "price limit" for oil and gas?

  The Group of Seven (G7) summit is scheduled to end on the 28th and is expected to announce the latest sanctions against Russia.

The G7 could propose a mechanism to cap prices on Russian gas and oil exports, the people said.

  The G7 attempted to continue to buy Russian oil and gas at low prices, while stabilizing international energy prices and reducing the pressure of rising inflation within Western countries.

This wishful thinking in the West is clanging, but it is difficult to implement.

  Crude oil shipments to Russia

  and limits imposed on insurance services

  The G7 summit was held in Garmisch-Partenkirchen, a small town in the southern German state of Bavaria, from the 26th to the 28th.

How to limit Russia's "profit from rising energy prices" is one of the main issues.

  Bloomberg reported that the leaders of the seven countries will instruct their ministers to explore the feasibility of capping Russian gas prices.

The British "Financial Times" reported that the "price limit" requires a "highly complex" mechanism and requires a lot of technical work to become a reality, according to some informed officials.

  The U.S. has recently pushed hard for European allies to impose price caps on Russian oil.

The main means, according to U.S. Treasury Secretary Janet Yellen, are restrictions on shipping and insurance services for Russian crude.

  The European Union launched its sixth round of sanctions against Russia in early June, barring EU companies from providing insurance and reinsurance for merchant ships carrying Russian oil.

The United States maintains that insurers can be allowed to provide shipping insurance for Russian oil, provided that the export price of the oil shipped does not exceed the "cap" set by the West, and it is not allowed if the conditions are not met.

  Italy's heavy reliance on Russian gas for energy supplies prompted Prime Minister Mario Draghi to advocate for a similar mechanism to cap Russian gas prices.

  Difficulty in implementing

  Requires unanimous consent of the 27 EU countries

  According to the analysis of the US "Wall Street Journal", in order to "limit" the price of Russian oil, Western countries and their allies need to form a monopoly alliance.

  EU leaders have asked the European Commission to explore ways to set a price cap on imported Russian gas.

"Financial Times" said that the implementation plan requires the unanimous consent of the 27 EU countries, which is difficult.

European Council President Charles Michel confirmed that the specific content of the "price cap" plan is to be determined. "The goal is to target Russia, not to make our lives more difficult and complicated."

  Some EU member states have questioned the idea, arguing that it would distort market mechanisms.

There are also some EU countries worried that Russia may retaliate for the "price cap" practice and further cut natural gas supplies to Europe.

  Sanctions on Russian energy exports

  produce 'serious side effects'

  The "Wall Street Journal" pointed out that before Russia launched a special military operation against Ukraine in late February, inflation was already occurring in Western countries.

Western sanctions against Russia's energy exports have "serious side effects" on Europe and the United States, further pushing up prices, increasing the financial burden of the people and fueling dissatisfaction.

  Text/Xinhua

  related

  Western sanctions may cause Russia to default on foreign debt for the first time in a century

  After June 26, the 30-day grace period for interest payable on two Russian foreign exchange bonds of about $100 million ended as Western sanctions cut off Russia’s payment channels to overseas creditors.

The US "Wall Street Journal" reported on the 26th, citing bondholders, that Russia did not pay the relevant payments, which means that it will constitute a default.

  Russian Finance Minister Anton Siluanov pointed out earlier that the European Union and the United States created obstacles for Russia to repay its foreign debts and deliberately labelled Russia a "default". The current situation can be called a "farce".

  According to Western media, Russia's last "foreign debt default" dates back to 1918, when Soviet Russia announced the abolition of the huge foreign debts of the Tsar and the Provisional Government.

In 1998, the Russian financial crisis broke out and the ruble collapsed. The government led by then President Boris Yeltsin defaulted on its domestic debt of 40 billion US dollars, but also repaid its foreign debt in a timely manner.

  This time is different.

Russia gets a lot of income from oil and gas exports, and the scale of its foreign debt is quite small compared to Russia's total economic output, and it is by no means "unaffordable".

However, Western sanctions have all but excluded Russia from the global financial system, creating an insurmountable payment hurdle for Russia.

  "This is a very, very rare situation. An otherwise solvent government is forced into default by a foreign government," said Hassan Malik, senior sovereign debt analyst at U.S. investment management firm Loomis-Sells. " This would be one of the most watershed defaults in history."

  Bloomberg reported that under normal circumstances, an international rating agency officially declares a country’s sovereign debt in default, but EU sanctions on Russia led rating agencies to withdraw their ratings of Russian entities.

The bond-related documents that expired on the 26th stipulate that if the holders of a quarter of the bonds agree, the holders can declare an "event of default" on their own.

  Russia has sought roundabout ways to make payments to bondholders in recent months, and last week announced that it would repay $40 billion of sovereign debt in rubles.

  Russian Finance Minister Siluanov said on the 23rd that the refusal of foreign correspondent banks to execute Russian foreign exchange orders was "force majeure" for Russia, forcing Russia to switch to rubles for settlement.

The European Union and the United States artificially create obstacles for Russia to repay its foreign debts, which will have a significant impact on the global financial system, and the trust in Western financial infrastructure will no longer exist.

  The "Wall Street Journal" explained that the default was expected as early as possible and would not immediately cause a chain reaction in the international financial market or the Russian economy.

Since Russia launched a special military operation against Ukraine in late February, Russian bonds issued abroad have sold for well below face value, a sign that investors believe a default is likely.

  Bloomberg believes that at present, this default is almost only "symbolic" and has little to do with the lives of the Russian people.

After the grace period ends on the 26th, the market focus will turn to investors' next move.

  Bloomberg explained that bondholders do not need to take immediate action and can choose to wait and see the situation in Russia and Ukraine, hoping that the West will eventually ease sanctions against Russia.

Bond documents show creditors are entitled to recourse within three years of the payment date.

  "Most bondholders will take a wait-and-see attitude," said Nomura Research Institute economist Nomura Nomura. Since Russia has the money to pay and is willing to pay its debts, if creditors declare it defaults, it is expected to encounter special legal challenges.

Bondholders can declare default, and Russia can claim that repayment obligations have been met.

  Text/Xinhua

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