India may not join US-led push to cap prices of Russia oil

Finance ministers of G7 international locations on 2 September proposed that oil-related service suppliers be allowed to transact in Russian seaborne oil and petroleum merchandise solely on the value cap or decrease. They stated the value cap is particularly designed to cut back Russia’s revenues and its capacity to fund the conflict in Ukraine and restrict the affect on international vitality prices, significantly for low and middle-income international locations. Russia has warned that it’s going to snap oil provides to any nation that joins the value cap plan.

“Overall, the best way the US pitches is {that a} value cap can also be good for India. On the opposite hand, Russia has threatened to cease provides to anybody collaborating on this plan. That doesn’t depart us wherever. In that case, why would we wish to be half of it? The deal right here is that we now have to stability our pursuits,” a government official, one of the two people cited above, said on condition of anonymity.

Russia, which has never been a major oil supplier to India, emerged as the third largest supplier to the energy import-dependent nation in FY23, as it snapped up supplies shunned by many countries. India gets Russian oil at an average discount of around $15-20 per barrel on a delivered-at-place (DAP) basis, wherein the seller bears the transportation risk for delivering at the designated port. In the current fiscal till August, India imported crude oil worth $11.41 billion from Russia, shows data from the Union ministry of commerce and industry. With India dependent on imports for as much as 85% of its oil needs and 55% of its natural gas demand, record-high energy prices are a big concern for a major consumer nation such as India.

“The discounts on Russian crude oil to Indian refiners depend on individual cargoes and may vary,” stated the second particular person cited above, who did not need to be named.

The value cap proposal additionally comes in opposition to the backdrop of a 2 million barrels per day output reduce by the Organization of the Petroleum Exporting Countries (Opec) and allies at a time of file excessive gasoline prices in India.

The US has been making an attempt to impress India to join the value cap plan, with visiting US deputy secretary of treasury Wally Adeyemo in August stating {that a} value cap on Russian oil will assist decrease vitality value for Indian customers. India, on its half, has remained steadfast in its relationship with Russia, selecting to neither pursue arbitration with the Russian government-owned Gazprom nor settle for a penalty from the world’s largest explorer of pure gasoline over its failure to honour the phrases of a deal to provide LNG to state-run GAIL (India) Ltd as reported by Mint earlier.

A US embassy spokesperson in New Delhi directed Mint to the Indian authorities for its views. “For the US place, I can share with you the transcript of a 14 October press convention that US treasury secretary Janet L. Yellen gave at the side of 2022 IMF-World Bank Annual Meetings,” the spokesperson stated in an emailed response.

“It’s an modern coverage that goals to reduce Putin’s income whereas holding Russian oil flowing onto international markets at low prices. This coverage has explicit advantages for growing international locations. A value cap will assist stabilize international vitality prices. It will even present growing international locations with higher leverage to negotiate higher prices for Russian oil,” Yellen said, according to the transcript.

The proposed ban on Russian Federation-origin crude oil is to come into effect on 5 December for maritime transportation of crude oil and on 5 February next year for seaborne transportation of petroleum products. “The coalition is essentially the G7, the EU , and Australia… All of these countries have agreed to ban the provision of services that are involved that our country’s firms in our countries supply for the transport of Russian oil, and the EU sanctions package includes shipping,” Yellen stated.

“Beyond that, we’re not making an attempt to join further international locations to a coalition. None of the coalition international locations are shopping for Russian oil or will purchase Russian oil. And none of the international locations outdoors the coalition are actually necessary suppliers of any of these monetary providers. So, we, the members of the coalition, will implement the value cap as soon as it’s adopted and guarantee that the suppliers of insurance, commerce, finance and different monetary providers that may be supplied all through the world can solely be supplied if the acquisition of oil by whichever nation happens at a value beneath the value cap,” Yellen added.

Queries emailed to the spokespeople for India’s ministries of external affairs and petroleum and natural gas, the US Treasury Department, and the Russian Federation embassy in New Delhi last Thursday remained unanswered till press time.

“We will be making sure that Western firms abide by that, but we honestly are not asking other governments to do anything, and of course, companies and governments can fight with subject to the cap if they can find ships. Insurance, trade, finance and so forth, which provided by nine coalition members that’s fine with the very existence of this price cap really raises the leverage that countries even that are like using western services have when they negotiate with Russia,” Yellen stated.

State-owned corporations corresponding to ONGC Videsh Ltd (OVL), Bharat Petroresources Ltd, Indian Oil Corp. Ltd (IOC) and Oil India Ltd (OIL) have additionally invested $16 billion in Russia to date, together with within the Far East and East Siberia, in oil and gasoline property corresponding to Sakhalin-1, Vankor and Taas-Yuryakh. OVL additionally acquired Imperial Energy Corp. Plc’s Siberian deposits.