In a recent interview with the Associated Press, Treasury Deputy Secretary Wally Adeyemo acknowledged that India will continue rejecting US and EU calls to boycott Russian oil due to the allure of cheap oil.
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In recent days, Reuters reported that India’s purchases of cheap Russian oil increased sharply in June, reaching 950,000 barrels daily. This represented a 15.5 percent increase from May (when India imported 819,000 bpd), but imports from its top two suppliers, Iraq and Saudi Arabia, fell 10.5 percent and 13.5 percent, respectively. And this is a significant increase over the 277,000 bpd imported in April.
The Reuters story also highlighted the fact that China and India now account for 50% of Russian seaborne exports as the West tries to completely ban and sanction Russian oil, attracted by drastically reduced pricing compared to the Brent international benchmark.
After five months of round after round of US and EU sanctions intended to “punish” Moscow and President Vladimir Putin, Russia’s energy earnings are already back to pre-war levels, with analysts widely estimating Russia’s energy sales are now on track to reach $285 billion this year.
And the idea in Washington and Brussels was that efforts to stop or impose a price cap on Russian oil, which is still being discussed, would somehow impede the continued Russian assault in Ukraine. Instead, it seems that the reverse impact—along with rising gas prices—is starting to take effect.
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However, in a recent interview with The Associated Press, Treasury Deputy Secretary Wally Adeyemo acknowledged that the allure of cheap oil could be used to persuade defiant nations like India or China to join in. He said, “We think that ultimately countries around the world that are currently purchasing Russian oil will be very interested in paying as little as possible for that Russian oil.”
However, these continue to be the main, huge obstacles to the viability of any proposed EU price cap plan:
James Hamilton, an economist at the University of California, San Diego, said garnering the participation of China and India will be important to enforcing any price cap plan.
“It’s an international diplomatic challenge on how you get people to agree. It’s one thing if you get the U.S. to stop buying oil, but if India and China continue to buy” at elevated prices, “there’s no impact on Russian revenues,” Hamilton told the AP.
“The less revenue Russia gets from selling oil, the less money they have to send these bombs on Ukraine,” he said.
Jennifer Granholm, the US energy secretary, is currently in Sydney for energy talks. Getting the support of the Quad nations, particularly India and Japan, for a Russian oil price cap policy is a top priority.
As seen in a prior Bloomberg preview:
Granholm is scheduled to meet with counterparts from the Quad group of nations — Australia, India, Japan and the US — during a visit to Sydney that’ll also touch on cooperation on supply of critical minerals needed for clean energy technologies.
“We want to put on the table the option of joining a buyers’ group that will have greater market power to be able to lower the price, and therefore lower the price of Russian oil and lower the profits to Putin,” Granholm said Monday in an interview in Sydney.
However, as was stressed in new analysis published in Foreign Policy on Wednesday, all signs point to New Delhi continuing to reject these calls “to act” from the Biden administration. Similar to the G7 summit last month, India’s lack of response and apparent dismissal of the Biden administration’s pleas during the Quad meetings in Sydney is speaking louder than words.
“Leaders of 12 democracies huddled in an Alpine resort in Bavaria last month,” FP recounted. “They included presidents and prime ministers of the G07 group of industrialized nations as well as their counterparts from India, South Africa, Indonesia, Argentina, and Senegal,” the report continues.
“But the handshakes, embraces, and jokes couldn’t mask the deep divide among them: While the G07 leaders’ closing communique focused on Russia’s war in Ukraine and efforts to cut the Kremlin’s earnings from energy exports, the 12-nation statement didn’t mention Ukraine, the war, or even oil once.”