To beat G-7 oil cap, Russia offers long-term crude supply at low rates

Tribune News Service

Sandeep Dikshit

New Delhi, September 12

In response to the US asking India to participate in the G-7 bloc’s plan to impose a price cap on Russian oil, Moscow has informed New Delhi about its counter-offer to provide a steady supply of crude at heavily discounted prices.

However, discounted Russian oil may face competition from ally Iran which wants to resume oil exports to India, with diplomatic sources here suggesting that the issue will be broached during a possible meeting between Iranian President Ebrahim Raisi and PM Narendra Modi at the Shanghai Cooperation Organisation (SCO) Council Summit later this week.

India has bought Russian oil cheaper than prevailing market price, but the discount has reduced over the months. While in May, Russian crude oil was discounted by $16 a barrel, it was $14 a barrel in June, $12 a barrel in July and $6 in August.

Russian oil has been facing aggressive pricing from Iraqi oil which it had been replacing. It is learnt that in July, Iraqi oil was offered at $20 barrel discount over the prevailing market prices as Baghdad sought to claw back into the Indian market. This led to Russia slipping from India’s second biggest supplier of oil in June to third biggest in August after Saudi Arabia and Iraq.

India, however, will remain interested in the offer for discounted Russian oil. It is not only cheaper but could be a steady source of supply, thus lessening India’s dependence on oil from West Asia.

The G7 bloc, which is determined to checkmate Russia in its war against Ukraine, has reportedly suggested two price caps. The crude oil cap will go into force from December 5, 2022, and the cap on refined products will be effective from February 5 next year.

India, feel US officials, can leverage the price cap to negotiate a lower price with Russia. “It is consistent with a price cap. We will not allow Russia to profit and get a war premium for invading Ukraine,’’ said US Treasury Department’s assistant secretary for terrorist financing and financial crimes Elizabeth Rosenberg.

The G-7 plan is to cap the price of Russian oil between $40 and $60 per barrel. This would provide crude at reasonable prices as well as deny Russia profits to prop up its economy and further the war in Ukraine.

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