Russia's state-controlled gas supplier Gazprom said on Friday it would indefinitely stop deliveries to Europe through the Nord Stream 1 pipeline after discovering a fault.
The announcement came after G7 member countries said they would attempt to cap the price of Russian oil in a major intervention designed to ease a growing energy crisis and starve the Kremlin of wartime revenue.
The wealthy allies will set a rate for Russian oil and freeze out suppliers who try to sell it at a higher price by denying insurance or financing to their cargo ships.
Nord Stream, which runs under the Baltic Sea to supply Germany and others, had been due to resume operating on Saturday after a three-day halt for maintenance.
But Gazprom claimed it could no longer provide a time frame for restarting deliveries after finding an oil leak that meant a pipeline turbine could not run safely.
The G7 is attempting to use its economic clout to stabilise the energy market and stop the runaway prices from funding Russia's onslaught against Ukraine.
G7 members Britain, France, Germany, Italy, the US, Canada and Japan are imposing the price cap, while the EU will have to consult its 27 members and third countries will be encouraged to join the buyers' cartel.
Diplomats intend for the ban to take effect on Russian crude oil in December and refined products such as petrol and diesel in February. US Treasury Secretary Janet Yellen said the plans would be finalised “in the weeks to come”.
“Russia is profiting economically from the uncertainty in energy markets caused by the war,” said German Finance Minister Christian Lindner, who led talks with his G7 counterparts and central bank chiefs on Friday, when the price cap was signed off.
“We don’t want Russia to continue to profit.”
Ms Yellen said the announcement was a “critical step forward in achieving our dual goals” of curbing prices and weakening Russian President Vladimir Putin, by weakening Moscow's finances and “hastening the deterioration of the Russian economy”.
Britain's Chancellor of the Exchequer Nadhim Zahawi, who is expected to leave office when Prime Minister Boris Johnson resigns on Tuesday, said the price cap had been a “personal priority” during his short tenure.
The G7 ministers said they would “seek to establish a broad coalition” and urged third countries who still import Russian oil, such as India, to adhere to the price cap.
“The price cap is specifically designed to reduce Russian revenue and Russia's ability to fund its war of aggression while limiting the impact of Russia's war on global energy prices,” they said.
“The measure has the potential to be particularly beneficial to countries, notably vulnerable low- and middle-income countries, suffering from high energy and food prices, aggravated by Russia’s war of aggression.”
No price level was given in Friday's announcement, which said the cap would be decided by the full coalition of buyers and revisited as necessary.
The club of rich democracies ignored a warning from Kremlin spokesman Dmitry Peskov on Friday that Russia would stop selling any oil to countries that impose a cap.
“We simply will not co-operate with them on non-market principles,” Mr Peskov said.
Former Russian president Dmitry Medvedev, a prominent Kremlin ally, suggested gas supplies could also be switched off to G7 members, notably Germany and its EU neighbours.
“There will simply be no Russian gas in Europe,” he said.
G7 leaders agreed on the principle of a price cap at their summit in June, but negotiations have continued since then on the details of carrying out such a plan.
US President Joe Biden was the leading advocate of the idea and has expressed hope that it could bring down domestic prices at a time of cost-of-living woes in the West.
The inflation crisis has worsened since then, as fuel prices rocket by 80 per cent in Britain, storm clouds gather over the German economy and the EU weighs up a separate price cap on electricity.
Western officials believe the Russian price cap is feasible because the G7 powers dominate global markets in finance and insurance, meaning suppliers would struggle to ignore the cartel.
This means third countries could keep buying Russian oil, even as G7 states such as Britain and the US impose embargoes, without the Kremlin collecting more money for fewer exports.
Despite Russia's falling oil export volumes, its oil export revenue in June increased by $700 million from May due to the higher prices, the International Energy Agency said last month.
The G7 has also discussed the possibility of imposing a price cap on gas, for which countries would simply name their price to Russia, but this was not part of Friday's announcement.
