Once the G7-backed ‘price cap’ kicks in, United States Treasury Secretary Janet Yellen has stated that the United States would be happy for India to buy as much Russian oil as it wants, provided that New Delhi does not use western insurance, financial, or maritime services.
India must rely on imports to fulfil 85 per cent of its need for oil. This makes India the third-largest consumer of oil in the world. India, along with most countries in the Global South, has experienced inflation rates higher than the global average this year. The reason for this is the increased cost of energy and food caused by western efforts to wean themselves off of reliance on Russian energy in the wake of the special military operation in Ukraine. India is currently Russia’s largest oil buyer after China.
When the EU stops purchasing Russian oil, it will be extremely difficult for Russia to continue shipping as much oil as it has been, Yellen told Reuters on Friday evening in New Delhi, on the sidelines of her meeting with Indian finance minister Nirmala Sitharaman. The meeting had been arranged for earlier in the day.
The Secretary of the United States Treasury stated that the majority of international purchasers are “dependent” on western services.
In September, the G7 group of the world’s wealthiest nations and Australia unveiled a plan to cap the international price of Russian crude oil and put a ceiling on the commodity’s price. On December 5th, the limit that has been proposed is going to go into effect.
To comply with the terms of the price cap, countries that buy oil from Russia will be required to do so at a lower price than the current market price. Following the special military operation in Ukraine in February of this year, the G7 has stated that the plan’s objective is to deprive Moscow of its earnings due to the action.
Earlier this month, Yellen indicated that the Biden administration was considering capping the price of Russian oil at less than $60 per barrel. Moscow has rejected the proposal.
Oil and gas exports from Russia were exempted from the eight rounds of economic sanctions that western governments have imposed against Moscow since the beginning of the special military operation in Ukraine. This is because the EU relies heavily on oil and gas exports from Russia. However, the EU has announced that from the following month, it will prohibit all marine imports of crude oil from Russia.
Yellen’s comments followed India’s foreign minister’s statement last week that his country will continue to purchase Russian oil because it helps India.
An Indian official told Reuters under anonymity that he didn’t believe that India would adhere to the price cap mechanism, and India has informed other nations of this fact. He said that India believes this is convenient for the majority of nations, and the supply of Russian oil should never be interrupted.
The official stated that steady supplies and prices are the most crucial factor.
Rosneft, Russia’s largest oil exporter, is growing its charter business to eliminate the need for customers to find tankers, insurance, and other services.
Even with Russian tankers, Chinese tankers, and a “shady” fleet of old, decommissioned tankers and re-flagged ships, according to Yellen, “it would be quite difficult for them to sell all the oil they were selling without an acceptable price.”
Russia is the largest oil exporter to India
Russia has overtaken Iraq and Saudi Arabia to become India’s largest oil supplier, according to independent research firms, as Asia’s third-largest economy benefits from rebates created by sanctions against Moscow.
Russia’s flagship oil, Urals, was $80 a barrel on Tuesday, compared to $97 a barrel of global benchmark Brent. The Urals brand was traded at a big discount in the region of $30 for most of the year. While assessments of Indian imports vary, analysts from three independent companies said Russian oil had displaced more expensive Iraqi and Saudi oil in the past three months.
Russian oil shipments to India, the fastest growing major economy, averaged 970,000 BPD in October, up about 942,000 BPD from September, according to research firm Kpler. Imports from Iraq averaged 806,000 BPD in September and 918,000 BPD in October, Kpler data show, while imports from Saudi Arabia fell from 860,000 BPD in September to 617,000 BPD in October: this is the lowest since March 2021.
Yaniv Shah, a senior analyst at research firm Rystad Energy, said that according to his company, Russia was India’s biggest oil supplier in June, August, September and October.
Vortexa data showed that shipments from Russia to India in October exceeded shipments from Iraq and Saudi Arabia for the first time. Government and commercial data compiled by Reuters showed that Iraq was India’s biggest supplier in September.
Victor Catona, Kpler’s lead oil analyst, said discrepancies between commercial data, such as Kpler’s data, and government figures could be due to timing differences.
According to Rajeev Jain of India’s Petroleum Ministry, the country’s leading oil suppliers will change. “Our oil companies will buy oil at the lowest prices on offer,” Jain told the Financial Times.