June 28^e, G7 leaders announced they agreed to explore the possibility of imposing a price cap on Russian oil to reduce Moscow’s energy revenues. While many see this as a political demand or a futile return to price controls, the truth is far more complex – with repercussions beyond the war in Ukraine or current energy issues.

The G7 is trying to coordinate a group of consumer countries to create a market where consumers rather than producers have leverage, a kind of monopsony. This is in stark contrast to OPEC+ which includes historical OPEC plus Russia and its neighbors. It is a group of producers created in 2016 who coordinate and enjoy almost monopolistic powers. The attempt to turn the G7 into an anti-OPEC monopsony would be one of the most significant geo-economic developments since the new millennium.

The move comes after Russian oil embargoes pushed up global crude prices for five months. Although oil stabilized from $70 a year ago to just over $100 a barrel on Wednesday, prices are still high. Concerns remain that rising crude prices have more than offset Russian losses from sanctions. The G7 is eager to address this issue. Their proposed monopsony mechanism would reduce or prohibit insurance and financing of Russian oil shipments above a set price. For example, if a tanker agrees to take a cargo from Russia at a rate higher than the price per barrel set by the G7, it will not be able to obtain the insurance and financial services necessary for the transaction or the continuation of operations.

Despite the announcement to explore price caps, it is still unclear if the plan will go ahead. After US President Joe Biden presented the idea at the summit to the enthusiasm of EU leaders, an official statement from the European Council expressed interest but asked for more detail on the details of the policy. The EU collectively remains Russia’s biggest customer despite its plan to phase out imports later this year, and negotiations leading to the deal have been tense, with landlocked Hungary insisting on exemptions.

To complicate matters further, G7 states have their own views on how best to implement the mechanism. France has advocated capping oil prices around the world instead of targeting only Russian oil, which implies immediate coordination or confrontation with OPEC while exploring alternative suppliers like Iran and Venezuela.

Italy has proposed further exploration of Russian gas price caps to curb inflation in the bloc. Interests within the G7 and the EU will diverge more over the winter months, when European resilience will be tested. Paris and Rome are making the typical error of middle powers which go too far for overambitious objectives. G-7 must walk before running.

Coordination will not only be difficult within the EU or the G7. The biggest consumers of Russian oil, China and India, have benefited enormously from receiving discounted crude from Russia as prices rose. The likelihood of either of these consuming countries changing course is rather low, given Beijing’s anti-Western stance. India is of particular concern to the West.

And even beyond the two Asian elephants in the room, the likelihood of southern actors sacrificing their own development imperatives in the name of G7 defense of Ukraine, European security and resistance to Russian aggression seems uncertain. Playing economic warfare is both an art and a science. Washington and its allies should do more to expand the alliance of oil consumers to make Moscow sweat.

Beyond the complications of creating a price cap, it’s also unclear what incentives or enforcement mechanisms the G7 is considering for it. In a world of shell companies and offshoring, even limited funding bans are difficult. Ahead of the summit, European leaders struggled to reach a consensus on action against Russian energy, fearing that Moscow could cut its oil and natural gas supplies and drive prices up further. It would be naive to assume that Russia will not retaliate by choosing not to sell at the prices imposed by the cap or by intentionally raising prices by cutting production. The Kremlin has already shown its willingness to suspend natural gas supplies in its quest to undermine the sanctions imposed on it.

If the G7 succeeds in creating a monopsony, a litany of problems will have to be faced. Enforcement and sanction mechanisms will inevitably be lacking. OPEC will certainly not be happy, and even if OPEC is defeated in any confrontation, as was the case after the 1973 oil embargo, any Western victory will be Pyrrhic. Monopsonies also create economic uncertainty and inefficiencies that will upend market calculations on everything from externalities to compliance. A monopsony could inadvertently relaunch oil trading on the black market with significant state support.

Despite the dangers and uncertainties, there is a great prize to be won for the G7 if it succeeds. The international energy regime would be totally revamped. The G7 would be able to freeze the energy-based foreign policy ambitions of upstart authoritarians. There would also be a powerful new tool that could help solve many problems related to compliance with international environmental treaties. The G7 and the EU collectively enforcing price regulations can do for energy production what unions have done for workers’ rights. But none of these promises are inevitable or even probable. The G7 will only succeed if it finds a way to untangle the Gordian knot of competing interests from a range of actors, even if it currently lacks a sword to speak of.

With the help of Aiganym Nurakhanova and Wesley A. Hill