KRUN, Germany – Four months after the Russian invasion, unprecedented Western economic retaliation and military aid to Ukraine have not curbed Vladimir V. Putin’s ability or apparent determination to wage war, leading leaders of the world’s richest democracies to seek new ways to to deter.
At a rally on Monday in the Bavarian Alps, President Biden and the other group of 7 leaders stood ready to embrace an aggressive but untried plan to manipulate the price of oil and curtail the revenues guaranteed by Putin’s war machine.
Even while seeking various tactics to hinder Moscow, Russia launched a barrage of rockets deep into Ukraine, targeting civilian targets including, Ukrainian officials said, a crowded shopping center where at least 13 people were killed. In a statement condemning the strike, the G7 leaders said: “Reckless attacks on innocent civilians constitute a war crime. Russian President Putin and those responsible will be held accountable.”
Allied leaders had hoped that economic sanctions would hurt the Russian economy so severely and quickly that Putin would face economic and political pressure to end the war. Instead, Russian oil revenues remain high, internal opposition has been muzzled and, as Mr Putin beams, it is the West suffering from high fuel prices that is risking domestic political backlash.
Russia will no doubt suffer more over time — its economy will shrink nearly 10 percent this year, economists predict, and a European Union embargo on most Russian oil imports will come into effect in December. But as Ukraine and Russia know all too well, every day counts in a war of attrition.
Government officials on Monday said Mr Biden would send advanced anti-aircraft defense systems to Ukraine, and NATO announced plans to increase the number of troops stationed in Eastern Europe and massively increase the troops ready for rapid deployment.
But the most new — and, according to the government, arguably the most sweeping — step came from the G7 meeting, where leaders approached an agreement in principle to set price caps for Russian oil, limiting cash flow to the Kremlin.
Despite the sanctions imposed so far, Russia’s oil revenues have soared this year, along with rising fuel prices, while consumers around the world are increasingly in pain at the gas pump. While Russia’s sales to the West have fallen, sales to China and India have increased.
The United States has banned Russian oil imports, but they have been minor, and the embargo on Europe, traditionally Russia’s largest customer, has not yet come into effect. Any price caps would not stand in the way of those bans.
A price cap would allow Russia to continue selling oil abroad, but severely limit its revenues. It is the brainchild of Janet L. Yellen, Mr. Biden’s Treasury Secretary, who has been telling world leaders in recent weeks that such a cap would be the best way to lower oil prices and avert a global recession.
The details are likely weeks or more from completion, requiring intense negotiations by G7 finance ministers, private companies and leaders of countries in Latin America, Africa and elsewhere that buy Russian oil. There is no guarantee that the plan will come to fruition quickly or completely, or that it will succeed as G7 leaders hope.
On Sunday, G7 leaders said they were banning Russian gold imports, another sign that the West is looking for new ways to financially isolate Moscow.
Understanding the war between Russia and Ukraine better
The G7 countries “stand steadfast in our solidarity with Ukraine,” Mr Biden and his co-leaders said in a written statement Monday, “reaffirming our unwavering commitment to support the government and people of Ukraine in their courageous defense of their country’s sovereignty and territorial integrity.”
Mr Biden did not speak to cameras or reporters on Monday, leaving him unusually inconspicuous at the summit. His national security adviser, Jake Sullivan, told reporters that President Volodymyr Zelensky of Ukraine, speaking via video link, had told G7 leaders that “he believes that a protracted conflict is not in the interest of the Ukrainian people, to avoid obvious reasons.”
“So he would like to see his army and those in the West who support his army make the most of the coming months,” Sullivan said, “to put the Ukrainians in the best position possible with regard to the situation on the ground.”
But events outside the Alps underlined how Mr Putin still has a strong hand, with Russian energy revenues of about $1 billion a day, allowing him to raise pensions and wages at home while keeping up with a war effort that has expanded in recent days.
On Monday, Moscow continued slow but steady gains in eastern Ukraine, with both sides suffering heavy losses as they continued shelling of cities across Ukraine.
In Kremenchuk, a city far from the front lines in central Ukraine, an explosion has reduced a shopping center to a flaming, partially collapsed ruin, and officials said it had been hit by a Russian missile. They said at least 13 were dead, 10 missing and 25 hospitalized.
The mall had “no strategic value”, Mr. Zelensky wrote on Telegram. “Just people’s attempt to live normal lives, which makes the occupiers so angry.”
According to regional governor Oleg Synegubov, in the northeast of the city of Kharkiv, a rocket attack killed four people and injured 19, including four children. He wrote on Telegram: “The enemy is deliberately terrorizing the civilian population.”
The attacks came a day after rockets rained down on Kiev, the capital.
The first request from Mr. Zelensky told G7 leaders on Monday to use anti-aircraft defense systems to defend against cruise missiles, Mr. Sullivan, and Mr. Biden “was able to respond positively to him.”
Officials said the United States would provide Ukraine with a NASAMS – an advanced medium-to-long-range surface-to-air missile defense system. Sullivan said the government would also send more ammunition for artillery and counter-battery radar systems.
In Brussels, NATO Secretary General Jens Stoltenberg said that member states would increase the troops kept “standby”, i.e. ready for rapid deployment, more than sevenfold, from 40,000 to 300,000, and the number of stationed in countries that would greatly increase borders to Russia. and its ally, Belarus.
The announcement came ahead of a NATO summit starting Tuesday, where the alliance is expected to update its strategic mission for the first time in 12 years, identifying Russia as an adversary rather than a potential partner, and China as a potential threat. .
Mr Biden has pressured his colleagues to support Ms Yellen’s oil price ceiling plan, and European leaders have become enthusiastic about the idea as they come to understand how it could work in concept.
Ms. Yellen is an economist by training, and her idea is based on an economist’s logic: that countries will try to pay as little as possible for a crucial commodity like oil, no matter where their leaders stand over the war in Ukraine.
It also rests on an idea that may seem shocking to anyone who watched Mr. Biden and allies target Russia’s oil exports shortly after the invasion. Rather than trying to drive Russian oil off the global market, the price cap would try to keep Moscow’s oil exports up, but at a slower pace.
With a price cap, US officials hope to take advantage of the fact that Western banking, insurance and shipping companies facilitate much of Russia’s oil exports — and use those industries as a bottleneck to lower the price of Russian oil.
There are several ways a cap could work, but under each of these, certain countries would continue to buy oil from Russia, but only at a price well below its global market value. Government officials believe that China and India could very likely push for payment of a comparably low rate — lower than the discount they currently enjoy — out of sheer economic self-interest.
Ideally, officials say privately, the chain of events could convince oil traders that global oil supply volume will not be disrupted if the European import ban ramps up in the coming months, a development that could weigh down prices.
That calculation could be wrong. Russia could decide to sell less oil if the price is kept low, although government officials say it would be expensive for Russian oil producers to cut off their wells.
There is also the political risk, in Europe and possibly the United States, of consumers becoming angry that Chinese and Indian consumers can buy Russian oil at a discount.
For Europe, which is bracing itself for a financial blow from the decision to phase out most Russian oil imports by the end of the year, an oil price cap could be good policy, but tough policy.
If the G7 leaders approve the policy, its application will be painstaking, politically fraught and time-consuming, European officials warned Monday. Reaching consensus in Europe to approve an oil embargo nearly broke the bloc’s unity against Russia; European Union officials and diplomats warned that reopening that debate to introduce the price cap could meet resistance from some EU countries.
A final deal would also require complex discussions, likely involving private companies such as insurers and major financial institutions, as well as countries outside Europe and the United States that import oil from Russia.
US officials said negotiators could work out details, with the blessing of G7 leaders, though they declined to provide an exact timeline.
“I think it can be done relatively quickly,” said Mr Sullivan.
Reporting contributed by Richard Perez-Penac from New York, Valerie Hopkins from Kremenchuk, Ukraine, Michael D. Shear from Madrid, Matina Stevis-Gridneff and Steven Erlanger from Brussels, Anton Trojanovskic from Paris and Ivan Nechepurenko from Tbilisi, Georgia.