G7 price cap on Russian oil comes into force, Indian not to be affected: Hardeep Singh Puri

Tags: Economy/Finance International News

The Group of 7 countries (G7) price cap of $60 per barrel on the Russian seaborne oil came into effect on 5 December 2022.  Seaborne oil means petroleum crude oil which is transported through tankers. It doesn't include Russian oils transported through pipelines. Russia however has refused to accept the decision of the G7 countries.

The G7( The United States of America, Canada, France, Germany, Italy ,United Kingdom and Japan) attempt to target Russian oil supplies  is seen as an attempt by the western countries to limit the Russian ability to finance its war on Ukraine .

Russia which is the world’s second largest exporter of petroleum oil in the world after Saudi Arabia  attacked Ukraine on 24 February as it accused Ukraine of genocide in the Eastern part of Ukraine . Western countries are supporting Ukraine and in an effort to cripple the Russian war effort, have imposed a series of sanctions on Russia.

Oil Price Cap 

The G7 countries, Australia and the European Union have agreed to impose a $60 per barrel price cap on Russian crude oil transported through sea. 

The G7 agreement allows Russian oil to be shipped to third-party countries using G7 and EU tankers, insurance companies and banks, only if the cargo is bought at or below the $60 per barrel cap.

However Industry players and a U.S. official said in October that Russia can access enough tankers to ship most of its oil beyond the reach of the cap, underscoring the limits of the most ambitious plan yet to curb Russia's wartime revenue.

Impact on India

The Union Minister of Petroleum and Natural Gas Hardeep Singh Puri has said that the decision of the G7 countries will not impact India.

 He said that ‘Russia is not our top supplier of oil; our traditional top suppliers are Iraq, Saudi Arabia, and the UAE”.  In 2021-22, India imported 53 percent of its oil from these countries.  In 2022-23, between April and September, 52 percent of India’s crude oil imports came from these countries,”

He said that if Russia refuses to sell crude oil at the capped price or cuts down production, it will affect the global supply chain. It will put pressure on producing countries to meet the energy demand, resulting in a spike in crude prices.