Buy As Much Russian Oil Outside Price Cap: US Continues To Lecture India, But India Still Wary

Both India's foreign minister S Jaishankar and petroleum minister Hardeep Singh Puri have time and again stated that India keeps its national interests high and would continue to buy Russia crude because it benefits India.

New Delhi: As India continues to be the top importer of Russian oil, only behind China, the United States of America continues to crib in the name of a “price cap” on Russian oil that’s yet to be fully actioned. In the latest interview with Reuters, US Treasury Secretary Janet Yellen said that the United States is happy for India to continue buying as much Russian oil as it wants, including at prices above a G7-imposed price cap mechanism, if it steers clear of Western insurance, finance and maritime services bound by the cap.

According to Yellen, the price cap would still drive global oil prices lower while curbing Russia’s revenues. She said Russia will not be able to 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.

“Russia is going to 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,” said Yellen.

December 5 is the deadline set for actioning the price cap placed on Russian oil by the European countries along with the US and Australia. Yellen said this price cap would give major buyers of Russian oil such as India and China a leverage over Moscow to push the oil prices even lower. 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,” Yellen added during her conversation with Reuters. 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,” she added.

The Euro-American price cap on Russian oil is intended to cut Moscow’s oil revenues even 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 $63-64 a barrel could form an upper limit.

The United States has been promoting this price cap ever since the EU first laid out plans in May for an embargo on Russian oil to punish Moscow for its invasion of Ukraine.

INDIA WARY OF UNTESTED PRICE CAP MECHANISM

Both India’s foreign minister S Jaishankar and petroleum minister Hardeep Singh Puri have time and again stated that India keeps its national interests high and would continue to buy Russia crude because it benefits India.

India has not officially responded to Yellen’s latest remarks, but officials quoted by Reuters have said they were wary of the untested price cap mechanism.

“I do not think we will follow the price cap mechanism, and we have communicated that to the countries. We believe most countries are comfortable with it and it is in no one’s case that Russian oil should go offline,” one Indian government official told Reuters, speaking on condition of anonymity. The official added that stable supplies and prices are most important.

Rosneft (ROSN.MM), 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.

Yellen said that even with Russian tankers, Chinese tankers and a “shadow” fleet of older, decommissioned tankers and re-flagged vessels, “I just think they will find it very difficult to sell all the oil that they have been selling without a reasonable price.”