Page 5 - NorthAmOil Week 27 2022

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