New Delhi: Clarifying the United States’ stance, two US officials stated on Monday that there hasn’t been any request for India to curtail its imports of Russian oil. Instead, the measures such as the price cap and sanctions orchestrated by the G7 aim to diminish Moscow’s profits from crude sales and disrupt its capacity to finance the conflict in Ukraine.
Following discussions to apprise their Indian counterparts on the second phase of enforcing the price cap, which commenced in December 2022, US Assistant Secretary for Economic Policy, Eric Van Nostrand, and Acting Assistant Secretary for Terrorist Financing, Anna Morris, revealed that attention will now be directed towards channels established by Russia to export crude oil without relying on Western service providers for shipping or insurance.
Responding to queries during an interaction at Ananta Centre regarding any fresh demands for India to cut down on Russian oil imports, Nostrand emphasized, “No, it’s crucial for us to maintain oil supply in the market. Our objective is to limit Putin’s profit from it, which is the purpose of this policy.” He further acknowledged India’s significant role as a global oil consumer and highlighted its vulnerability to disruptions in the global supply chain, which the price cap aims to mitigate.
Morris noted that since the latter half of 2023, the US had observed Russian attempts to establish a “shadow fleet,” comprising ships, insurers, and other maritime services with opaque ownership structures and a history of evading sanctions.
She highlighted that Russia’s investments diverted funds away from the conflict in Ukraine. “While we appreciate their investment in oil tankers rather than tanks, it’s imperative for us to respond to the evolving situation where Russia has created alternative channels to transport oil without relying on Western coalition services,” Nostrand added.
In the aftermath of Russia’s invasion of Ukraine, the US and its Western allies urged India to refrain from purchasing discounted Russian commodities, particularly oil and fertilizers. Despite not publicly condemning Moscow’s actions, New Delhi increased its procurement of Russian crude, subsequently displacing top energy suppliers like Saudi Arabia and Iraq.
Indian authorities have justified their actions as necessary for securing affordable energy supplies amidst global market volatility. However, payment struggles for the crude, especially after significant sums accumulated in Russian bank accounts in India, have posed challenges.
Regarding inquiries about India paying for Russian oil in currencies like the UAE dirham, US officials refrained from commenting. They acknowledged that the $60 per barrel price cap wouldn’t apply to crude imports not utilizing shipping or services from the Western coalition.
The G7-imposed price cap prohibits the utilization of Western services such as insurance and transportation for tankers carrying Russian oil priced above $60 a barrel. Since October 2023, the coalition has intensified enforcement of the price cap by rigorously scrutinizing the oil trade employing coalition services and escalating costs for Russia to sell oil through the “shadow fleet.”
The US Treasury Department now publicly sanctions vessels engaged in the oil trade exceeding the price cap. In February, the department designated Sovcomflot, Russia’s state-owned shipping company and fleet operator, and identified 14 of its oil tankers as “blocked property.”
Morris highlighted that Russian oil prices had depreciated compared to global prices, with the discount on the loading price of Russian Urals oil increasing from $12-$13 below world prices to approximately $17-$18 in February.
Phase two of the price cap aims to make it more challenging for Russia to transport oil outside services provided by the Western coalition, thereby compelling it to either sell more oil under the cap with coalition services or offer larger discounts to global buyers outside the coalition, Nostrand concluded.
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