- China and India have increased their purchases of Russian oil in the wake of Moscow's invasion of Ukraine, benefiting from discounted rates.
- The price cap is expected to be ready before early December when EU sanctions on seaborne imports of Russian crude kick in.
- But market players are still waiting for further details on the exact level of the cap.
BALI, Indonesia — The European Union on Saturday urged China and India to join the G-7 initiative to apply a cap on Russian oil prices, saying it is unfair for countries to pay excess revenues to Moscow amid the Kremlin's war in Ukraine.
The G-7 nations announced Friday that they agreed on a plan to impose a set price on Russian oil.
The policy is designed to reduce the profits that Russia makes from selling oil and acts as another punitive measure against the Kremlin over its onslaught in Ukraine.
Details of how the price cap will work are still being finalized, but energy analysts have raised concerns about this plan, in particular about whether key consumers such as China and India will join in.
China and India have increased their purchases of Russian oil following Moscow's invasion of Ukraine, benefiting from discounted rates.
When asked whether the EU expects China and India to help with the proposed price cap, Europe's Energy Commissioner Kadri Simson said: "I think that they should."
Speaking to CNBC on the sidelines of the G-20 energy meeting in Indonesia, Simson said China and India "are willing to buy Russian oil products while excusing themselves that this is important for their security of supply. But it is unfair to pay excess revenues to Russia."
"So a cap is giving also the buyers who have not joined our sanctions a chance to receive oil with a fair price, a price where a war factor is not added," Simson said.
The U.S. said last week that it had constructive talks with India on the matter, according to Reuters, while China reportedly said in July that a price cap was a "very complicated issue."
The price cap is expected to be ready before early December when EU sanctions on seaborne imports of Russian crude kick in. But market players are still waiting for further details on the exact level of the cap.
"The initial price cap will be set at a level based on a range of technical inputs and will be decided by the full coalition in advance of implementation in each jurisdiction. The price cap will be publicly communicated in a clear and transparent manner," the G-7 said in a joint statement.
The EU's energy policy chief did not say when the final details will be presented but added that technical work is ongoing. "We are under huge time pressure," she said, adding that this typically means such steps happen "sooner rather than later."
Russia has said it will not sell oil to nations that impose a price limit. What's more, in the wake of the G-7 announcement, Russia's state-owned energy giant Gazprom said it would not restart flows via the Nord Stream 1 pipeline due to technical issues.
The Nord Stream 1 pipeline, which connects Russia and Germany via the Baltic Sea, was due to reopen on Saturday after three days of technical works.
European officials have criticized Russia for using gas as a weapon of war, an accusation the Kremlin denies.
Meanwhile, some market analysts continue to raise questions about whether the price cap will be effective in reducing Russia's oil revenues.
"The main impact of the G-7 oil price cap will be to further shift economic competitiveness from Europe to India, Turkey, China and other Asian states," Chris Weafer, chief executive officer at Macro-Advisory, said in an email to clients.
"Russia will not sell oil to so-called unfriendly western nations but will continue to sell to Asian nations at a discount to the global price," he added.