Russia and G7 compete for India’s support over looming oil price cap

As the world’s second largest oil importer, India’s participation is crucial for the G7 strategy to put a price cap on Russian oil, in order to prevent the country from funding its war with Ukraine. India on the other hand has increased the number of oil shipments from Russia to 13 per cent of its imports from all sources, from 2 per cent since February. As G7 nations try to secure India’s support for price caps, Russia is offering discounts to India, according to a report by Business Standard.

What’s in it for India?

With a view to tackle inflation, India has resisted western pressure to import oil from Russia, and got a $16 per barrel discount compared to its crude import basket in May. The discount further reduced to $14 per barrel in June and $6 per barrel in July, when India increased oil imports from Saudi Arabia and Russian shipments went down by 7.3 per cent. After a rise in imports from Saudi Arabia, Russia is now India’s second largest oil supplier after Iraq, which shipped crude to India for $9 less than Russian oil in June.

Russia’s Foreign Minister Sergey Lavrov expressed confidence that India won’t join the G7 push to impose price caps on its oil. On the other hand, US Treasury Department’s assistant secretary for terrorist financing and financial crimes, Elizabeth Rosenberg said that India will benefit from the caps even if it doesn’t accept the G7’s proposal. She said that India will be able to get affordable energy by leveraging the price caps set by G7, to negotiate better rates with Russia.

Insured against a fallout

A Rs 500 crore insurance pool created with support from government-owned General Insurance Corporation of India has also enabled India to withstand western pressure on price caps. It protects India from concerns about the global insurance industry refusing to cover Russian oil and gas consignments priced above the G7 cap.

According to reports from The Economic Times, India has said it will support the price caps on Russian oil, only if it can import oil from Iran and Venezuela as an alternative.