Virendra Pandit
New Delhi: The United States, which for months has been trying to pressurize India to desist from buying discounted Russian crude, on Friday said Washington is “happy” for New Delhi to continue buying as much Russian oil as it wants, including at prices above a G7-imposed proposed price cap mechanism beginning next month.
But the sting is in the tail: India could avail of the discounted Russian oil if it steers clear of Western insurance, finance, and maritime services bound by the cap. India could profitably import Russian oil if it could take care of factors like insurance, finance, and maritime services, which could be discontinued by the West once the price cap starts in December.
US Treasury Secretary Janet Yellen said the proposed cap would still drive global oil prices lower while curbing Russia’s revenues, the media reported.
Russia cannot sell as much oil as it does now once the European Union halts imports without resorting to the capped price or significant discounts from current prices, she said.
“Russia might find it very difficult to continue shipping as much oil as they have done when the EU stops buying Russian oil,” Yellen said. “They’re going to be heavily in search of buyers. And many buyers are reliant on Western services.”
India is currently Russia’s largest oil customer other than China.
Details of the price cap to be imposed by the G7 democracies and Australia are yet to emerge ahead of a December 5 deadline.
The existence of the cap would give India, China, and other major buyers of Russian crude leverage to push down the price they pay to Moscow, Yellen said.
That means it would be a buyers’ market with importers forcing Russia to offer more discounts to clear its inventories at the earliest.
Russian oil “is going to be selling at bargain prices and we’re happy to have India get that bargain or Africa or China. It’s fine,” she told a media outlet.
India and private Indian oil companies “can also purchase oil at any price they want as long as they don’t use these Western services and they find other services. And either way is fine.”
The cap is intended to cut Russia’s oil revenues while keeping Russian crude on the market by denying insurance, maritime services, and finance provided by the Western allies for tanker cargoes priced above a fixed dollar-per-barrel cap. A historical Russian Urals crude average of USD 63-64 a barrel could form an upper limit.
The cap is a concept promoted by the US since the EU first laid out plans in May for an embargo on Russian oil to punish Moscow for its invasion of Ukraine on February 24 this year.
Yellen’s remarks came after India’s External Affairs Minister S. Jaishankar said last week that New Delhi would continue to buy Russian crude because it benefits the energy-deficient country that imports 85 percent of its crude oil needs.
Rosneft, Russia’s largest oil exporter, is expanding its tanker charter business to avoid its buyers having to find tankers, insurance, or other services as the price cap.