The cap, agreed to by the G7 on September 2, will come into effect on December 5 and aims to force down the price of Russian oil by imposing an artificial price cap, probably about $US40-$US60 a barrel.
The G7 and supporting nations would seek to impose a cap on the price paid by importing nations by legally prohibiting the provision of services, such as insurance, which enable maritime transportation of Russian crude oil and petroleum products purchased above the price cap.
Mr Putin has largely been able to circumvent Western embargoes on Russian oil because India and China have refused to condemn the Ukraine invasion and further trade with Moscow.
One hope from the G7 plan is China and India would negotiate down the prices they are paying if the cap works.
Despite lower export volumes, Russia’s proceeds from oil sales in June were up $US700 million ($1 billion) over the previous month, because of soaring prices.
Mr Putin has threatened not to sell oil to anyone participating in the price cap scheme but US Treasury Secretary Janet Yellen believes Russia would have an incentive to sell oil at or near the cap because it would otherwise have to shut down production that would be difficult to restart.
Foreign Minister Penny Wong said, “supporting the price cap demonstrates Australia’s resolve to limit the global economic impact of Russia’s invasion of Ukraine while maximising the pressure on Russia to end the conflict”.
“Australia will engage constructively with the G7 as they work towards effective implementation of the cap.
“We encourage other countries to join Australia and our partners in implementing the oil price cap.”
The Ukraine invasion was on the agenda in Canberra on Monday when Dr Chalmers met his Indonesian counterpart, Sri Mulyani, to sign a Memorandum of Understanding that strengthens the economic co-operation between the two countries.
Indonesia is hosting the G20 leaders’ summit in Bali on November 15-16 and Mr Putin’s participation will be controversial.
The G20 finance ministers’ meeting next month will be dominated by the global economic instability being exacerbated by the Ukraine invasion.
“You will have Australia’s full support as we navigate some tricky terrain,” Dr Chalmers told Ms Mulyani.
“Let’s not mince words: our challenges are intensifying, not dissipating.
“Inflation stalks the world, with central banks responding decisively and bluntly; global growth is slowing; most risks are tilted to the downside.
“The United States and United Kingdom’s economies are in reverse, and China’s is decelerating.
“Meanwhile, in Europe, the war in Ukraine has sparked an energy crisis that shows no signs of abating.”