Tight oil supplies and relatively high prices are weighing on India's ability to jump on board with US efforts to implement a global price cap on Russian crude, Indian External Affairs Minister Subrahmanyam Jaishankar said Sept. 27.
Speaking at a press event with US Secretary of State Antony Blinken, Jaishankar candidly said that India will judge any action impacting global energy markets by how it affects India and other countries in the Global South. He added that there is growing concern among developing countries with regards to how their energy security needs are being addressed, particularly as the energy markets are "under very great stress."
"We are a $2,000 per capita economy," Jaishankar said. "The price of oil is breaking our back. That is our big concern."
The EU plans to ban, as of Dec. 5, the import of seaborne Russian oil and the provision of insurance, trade finance, banking, brokering, navigation and other maritime services by EU companies for the transport of Russian crude to any location. A prohibition on refined petroleum products is set to kick in Feb. 5.
Because the providers of these maritime services are heavily concentrated in the EU and G7 countries, for instance providing 90% of global shipping insurance, Russia could be forced to shut in a substantial portion of its crude and refined products. As that could spark a rise in global fuel prices, the price cap is intended to provide a carve out for EU and G7 maritime service providers to continue aiding with the seaborne transport of Russian oil as long as it is sold at or below the cap level.
Asked whether India would formally join the price cap mechanism, Jaishankar, whose agency is responsible for implementing Indian foreign policy, said technical conversations between the US and India were underway but that it remains a G7 initiative.
"Countries in the Global South have found it difficult to compete for limited energy, not just in terms of escalating pricing, but often in terms of availability," he said. "Countries have had tenders for which they don't even get a reply from suppliers, so our concern right now is that energy markets already under stress must soften up."
US sees 'opportunity'
The US Treasury Department has argued that not every country procuring Russian oil after Dec. 5 has to join the price cap scheme for it to be effective.
Rather, those countries choosing not to join would still be able to use the price cap as a highly effective bargaining tool to negotiate supply and purchase deals with Russia at a sharp discount. The price cap gives them greater price transparency and leverage when they negotiate with Russia, US officials have said.
Blinken Sept. 27 said that implementing the oil price cap would "deny Russia excess revenues that it would use to prosecute its aggression against Ukraine, and at the same time keep oil flowing on world markets."
He added that the US is "working with global partners to reduce dependence on fossil fuels and accelerate the transition to renewables."
Blinken acknowledged that there would be challenges in the months ahead, but said there was also a "significant opportunity ... to finally end the dependence of Europe on Russian energy and thus the position that Europe is in of being on the receiving end of the weaponization of energy by Russia, and also to accelerate the transition to renewables and to make sure that we're addressing the climate challenge that we face."