Page 5 - NorthAmOil Week 27 2022
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NorthAmOil                                   COMMENTARY                                          NorthAmOil


                         “The more we talk to different countries about it,   The country has maintained a neutral stance
                         the more they understand the concept that we’re   regarding the war in Ukraine, and has refused to
                         putting forward and understand the rationale,”   join the international sanctions regime against
                         a second official told the news agency. If the cap   Russia, or cut down on oil imports from the
                         is not introduced, Moscow can continue collect-  country. In fact it has actually ramped up sup-
                         ing cash for oil sales for its “war machine,” the   plies from Russia, taking advantage of the heavy
                         person said.                         discount that the Urals oil blend currently trades
                           The US will also reach out to India in the   at compared to Brent. Russia today is its sec-
                         coming weeks in the hope of securing its sup-  ond-largest oil supplier.
                         port. A source told Reuters earlier this month   White House national security advisor Jake
                         that G7 governments were still determining   Sullivan said in late June that talks with India
                         which services for oil transport could be with-  regarding the cap had begun. However, New
                         drawn for Russian cargoes where the price cap   Delhi has yet to publicly signal either its sup-
                         is not observed, including shipping services,   port or rejection of the proposal. Discussions
                         insurance, trade finance, brokering of cargoes   are also taking place with China, which Russian  New Delhi has yet
                         and other services.                  oil imports hit a record nearly 2mn barrels per   to publicly signal
                                                              day (bpd) in May, as its refiners cashed in on dis-
                         Obstacles                            counted supplies.                    either its support
                         Previously, it has been suggested by officials that
                         the price cap could be set at or close to Russia’s   Incentives          or rejection of the
                         marginal cost of production, meaning that the   Under the price cap, India and China would be
                         Kremlin cannot make any profit from its oil   able to buy Russian oil at even lower prices, giv-  proposed price
                         exports.                             ing them an incentive to sign up.    cap for Russian
                           The reasoning is that Russia would still con-  But both could be reluctant to join, through
                         tinue producing its crude, because the alterna-  fear of repercussions from Moscow – namely   crude oil
                         tive would be the costly shut-in of fields and the   cuts in oil supply. And China is very unlikely
                         loss of strategic markets overseas, which could   to agree to a plan that if successful would finan-
                         cause irrevocable damage to its oil industry.  cially cripple Russia, given the two countries are
                           On the other hand, this incentive may not be   increasingly close political allies, united largely
                         enough, and Russia could react drastically, by   by their opposition to US hegemony.
                         cutting oil and possibly gas exports to Europe,   Japan looks firmly on board with the price
                         even if this was against its own interests.  cap, and its prime minister, Fumio Kishida, on
                                                              July 4 proposed that the cap be set at around half
                         India’s stance                       the current price of oil. And South Korea looks
                         Critically, of course, the price cap also needs as   similarly keen. But without the support of India
                         much worldwide support as possible in order to   and China, and indeed likely many other buyers
                         work. And a lot will depend on whether India   around the world, the cap could prove ineffec-
                         comes on board.                      tual. ™





































                          Yellen (L) pledged Washington’s support for Kyiv at a meeting with Ukrainian PM Denys Shmyhal (R) in April 2022
                                                                              (Photo: Twitter/@SecYellen)



       Week 27   07•July•2022                   www. NEWSBASE .com                                              P5
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