IEEJ：June ©IEEJ 2022
Special Bulletin
A Japanese Perspective on the International Energy Landscape (591)June 30, 2022

G7 Summit Ended with Communique Focusing on Ukraine Crisis
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn June 28, top leaders from the Group of Seven industrial democracies ended their threeday summit in the southern German city of Elmau after adopting their communique vowing to exert
further pressure on Russia continuing its war of aggression against Ukraine and sustain support forUkraine as long as necessary.
At the annual summit where top G7 leaders have face-to-face discussions on important
global issues and seek to pursue and implement solutions, topics include political, economic, security
and other significant issues. Usually, the most urgent and serious issues at the time of the G7 summit
have dominated discussions. Among a wide range of issues taken up at the latest G7 summit, thebiggest topics included Russia’s military aggression against Ukraine and international political,
security, energy and food crises amid the Ukraine crisis. This is the reason the G7 leaders issued thestatement expressing their determination to exert further pressure on Russia and sustain support forUkraine, as noted above.
More than four months after Russia launched the military aggression, it is enhancing its
offensive to control eastern Ukrainian states, while Ukraine is harshly resisting the Russian offensivewith Western support. The situation remains stalemated, with the war expected to be prolonged. G7led Western countries have maintained their attitude of rejecting Russia’s invasion of Ukraine as aunilateral attempt to change the status quo by force and a grave challenge to international order. At thelatest summit, the G7 leaders clarified their resolve to unite in tackling the Russian aggression.
Over the past four months, the world has been exposed to dramatic changes, which havegreatly affected not only the global economy and Europe but also all national economies and civic life.
As the two warring countries have been important grain producers and Ukrainian grain exports havebeen constrained by Russia’s Black Sea blockade, grain and other food prices have shot up, with afood crisis becoming a matter of global concern. Another issue that gravely affects the global economy,
national economies and civic life is energy insecurity associated with energy price spikes. Naturally,
these issues were taken up as top priority topics at the Elmau G7 summit.
In the communique, the first part following the preface dealt with climate and energy.
Climate change was expected to be given priority at the Elmau summit. Given that Germany is known
as a “green country” among European countries that earnestly tackle climate change countermeasures,
its Scholz administration including the Green Party was well expected to promote the enhancement ofclimate change countermeasures even more proactively than the previous Merkel regime. The G7
communique first took up climate change and clearly reiterated the significance of enhanced initiatives
to achieve the goal of limiting global warming to 1.5℃, indicating the G7 summit host country’sextraordinary preparedness and ambition to fight against climate change. The communique called forlaunching a Climate Club within 2022 as advocated by the Scholz administration. While the detailed
design of the club is left for future talks, it is expected to cover not only the G7 members but also1

IEEJ：June ©IEEJ 2022
emerging and developing countries and promote the introduction of a carbon border adjustment
mechanism proposed and considered by the European Union to implement technical and financial
support for decarbonization in emerging and developing countries.
The Climate Club and other climate change initiatives were comprehensively included into
the G7 communique, falling within expectations. The current energy crisis concern might havecontributed much to the handling of climate change countermeasures in the communique for theGermany-hosted G7 summit. Germany might have no choice but to give top priority to stable energy
supply and energy security.
In response to the EU’s announcement of its Russian oil embargo on May 30, crude oil prices
briefly soared above $120 per barrel. They fell back on global economic insecurity later but haveremained high around $110/bbl. As the G7 and EU came up with a Russian coal embargo earlier, steamcoal spot prices topped $400 per ton temporarily and have remained high. The latest matter of concern
regarding energy security is Russia’s move to reduce and suspend gas supply to Europe. Particularly,
Russia has substantially cut gas supply to Germany and other European countries through the Nord
Stream I pipeline since mid-June, leading to growing concerns about gas shortages towards the next
winter. Western countries have voluntarily imposed Russian coal and oil embargos but expected that
it would take much more time to come up with a Russian natural gas embargo as it is difficult for themto find alternative gas suppliers. Then, Russia has seemingly attempted to destabilize Europe. In suchsituation, Europe has no choice but to prepare for contingent disruptions to gas supply. In a symbolic
development, Germany is planning to take advantage of coal-fired power plants to prepare for gas
shortages. To protect Germany’s economy and people, the Scholz administration has changed its
policy to give priority to stable energy supply even at the cost of increasing CO2 emissions for theimmediate future.
This is the reason energy security was treated as an issue as urgent as food security. Energy
price spikes under the Ukraine crisis represent a serious challenge to global energy security,
threatening to affect global economic growth and stability. At the same time, energy price spikes areworking to raise Russia’s energy export revenue, nullifying the objective of Russian energy embargos.
Some estimates indicate that Russian oil export revenue in 2022 would increase from the previousyear. At the G7 summit, therefore, the United States proposed a plan to cap Russian oil prices in linewith the G7 policy of increasing pressure on Russia.
In fact, however, it may be difficult to set and enforce a price cap on Russian oil sales.
Extremely complex and difficult problems regarding the price cap include how the price cap shouldbe, what the approach on setting the price cap would be, how the price cap would be combined with arestriction on insurance on oil-transporting tankers that is considered as a measure to enforce the pricecap, how the price cap system would be developed to meet realities regarding Russian oil transactions
and how participation by China and India in the price cap system would be secured. Due to suchcomplexity and difficulties, the communique left the price cap for future consideration. The G7
members’ hope to impose constraints on Russian oil revenue to increase the effects of their economic
sanctions is understandable. However, whether such system could be designed to meet market realities
may attract attention in the future.
Given energy price spikes and potential gas shortages for the coming winter, the G7
members face a difficult challenge to secure their and the world’s stable energy supply while exertingpressure on Russia. As the Ukraine crisis is prolonged, the challenge will become a strategicinternational issue for Japan scheduled to host the next G7 summit.
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