G7 to link any new sanctions to Russia’s approach to Ukraine peace talks

Any G7 sanctions after February will be linked to whether Russia negotiates in good faith to end the conflict in Ukraine, G7 foreign ministers said in a joint statement released Feb. 15.

The G7 covers Canada, France, Germany, Italy, Japan, the UK and the US. Alongside allies in the EU and Australia, it imposed price caps on Russian oil as part of its response to Russia's full-scale invasion of Ukraine.

The statement said that the G7 has made an important contribution to ending the war "by supporting Ukraine financially through the use of extraordinary revenues stemming from Russian sovereign assets, by imposing further cost on Russia, if they do not negotiate in good faith, through caps on oil and gas prices, and by making sanctions against Russia more effective."

US and Russian officials are likely to discuss sanctions in coming weeks after US President Donald Trump and his Russian counterpart Vladimir Putin agreed to start Ukraine peace negotiations Feb. 12.

S&P Global Commodity Insights said that an end to the war would presumably be linked to an easing or removal of US sanctions on Russian oil.

"This will not lead to an increase in Russian oil production on its own, but it would increase the number of markets willing to buy Russian oil. It could also give confidence to the Russian upstream industry for more investment," Commodity Insights analysts said.

Current G7 sanctions include a $60/b price cap on sales of Russian crude as well as a $100/b cap on products that typically trade at a premium to crude and $45/b on those that generally trade at a discount to crude.

Sanctions have resulted in Russian oil trading at major discounts. In April 2022 its key crude grade Urals was trading at a discount of about $40/b to Dated Brent, according to Platts assessments. It has since narrowed and was at a discount of $15/b on Feb. 14, according to the Platts data.

Russian production has been constrained by its participation in the OPEC+ crude production agreement, which includes a current Russian quota of 8.978 million b/d.

Separate from G7 measures, the EU is planning to announce a 16th sanctions package(opens in a new tab) on Russia around Feb. 24. It sees any Russian sanctions relief as contingent on Moscow accepting accountability for its invasion of Ukraine and agreeing to a Ukraine reconstruction plan.

The EU aims to phase out imports of Russian fossil fuels by 2027.