Price cap on Russian oil imports: Having “intensive engagement” with key oil consuming countries, Says US

Washington: The US has said it is having “intensive engagement” with key oil consuming countries, including India, on the specifics of how a price cap on Russian oil imports would work, but the issue was not discussed at the level of President Joe Biden and Prime Minister Narendra Modi during the recent G7 Summit. The […]

Washington: The US has said it is having “intensive engagement” with key oil consuming countries, including India, on the specifics of how a price cap on Russian oil imports would work, but the issue was not discussed at the level of President Joe Biden and Prime Minister Narendra Modi during the recent G7 Summit.

The G-7 leaders — representing the US, Germany, France, Italy, the UK, Canada and Japan — in a joint statement on Tuesday said they would explore far-reaching steps to cap Russia’s income from oil sales that are financing its war with Ukraine.

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US National Security Advisor Jake Sullivan on Tuesday said ministers have now been tasked by the leaders to work on the specifics of how a price cap on Russian oil would actually work.

Responding to a question from the media on whether there were discussions with Prime Minister Modi on India’s purchase of Russian oil during the G7 Summit in Germany, Sullivan said, “One aspect of that, of course, is intensive engagement with key consuming countries. India is one of those countries. That engagement has begun.

“We have begun talks with India about how a price cap would work and what the implications of it would be. And I will leave it at that because, of course, those are ongoing diplomatic discussions,” Sullivan told the media travelling to Spain for the NATO Summit.

President Biden and Prime Minister Modi attended the G7 Summit in Germany and the two leaders briefly interacted before a group photo session.

Responding to another query, Sullivan said Biden did not speak with Modi about the Russian oil issue during the G7 Summit.

However, he said, “at senior levels of the US government, we had communications with the Indians yesterday (Monday). Before it goes to leader-to-leader level, we need to work through the details with their team at basically the Cabinet level, which is where it is right now. And then, if necessary, it can be elevated.” During his interventions at the G7 Summit, Prime Minister Modi emphasised that energy access should not be the privilege of the rich only – a poor family also has the same rights on energy.

Referring to the Ukraine crisis, he also pointed out that the impact of the geopolitical tension is not just limited to Europe. “The rising prices of energy and food grains are affecting all the countries. The energy and security of developing countries is particularly at risk,” Modi said during the summit.

Ahead of the G7 Summit, Foreign Secretary Vinay Mohan Kwatra said India’s sourcing of crude oil is totally driven by its national interests and that its position on the issue is “very well understood” by various countries.

“Whatever the trading arrangements that India puts in place with regard to the purchase of crude oil all over the world are determined purely from the consideration of energy security of India and there is no other consideration,” Mohan Kwatra said in New Delhi last week while responding to a question on whether India would be under pressure from the G7 countries to restrict its procurement of crude oil
from Russia.

“I think that consideration is very well understood. I would even say appreciated across the countries. I do not see any point of assuming any pressure on that issue. India has continued its oil trade and purchases from wherever we need to do it,” he said.

India, the world’s third-biggest oil-importing and consuming nation, has long defended purchases of discounted crude oil from Russia following President Vladimir Putin ordering the invasion of Ukraine.

The Oil Ministry had last month stated that “energy purchases from Russia remain minuscule in comparison to India’s total consumption.” India has taken advantage of discounted prices to ramp up oil
imports from Russia at a time when global energy prices have been rising.

After the US and China, India is the world’s third-largest consumer of oil, over 85 per cent of which is imported.

Following its invasion of Ukraine, there are now fewer buyers for Russia’s Ural crude oil, with some foreign governments and companies deciding to shun Russian energy exports, and its price has fallen. Indian refiners have taken advantage of this and bought Russian crude oil at discount as high as USD 30 per barrel.

Russia has overtaken Saudi Arabia to become India’s second-biggest supplier of oil behind Iraq as refiners snap up Russian crude available at a deep discount following the war in Ukraine, industry data showed.

Indian refiners bought about 25 million barrels of Russian oil in May or over 16 per cent of all their oil imports.

Russian-origin crude hit 5 per cent of India’s total seaborne imports in April for the first time, rising from under 1 per cent throughout 2021 and Q1 2022, the data showed.