US has not asked India to reduce Russian oil imports: Officials

NEW DELHI: The US has not asked India to reduce its imports of Russian oil and the price cap and sanctions regime imposed by the G7 are aimed at squeezing Moscow’s profits from crude sales and impeding its ability to finance the war in Ukraine, two US officials said on Thursday.

Russian oil is priced above $60 a barrel (File Photo)

The US officials, speaking after meetings to brief their Indian counterparts on the second phase of implementing the price cap, which came into effect in December 2022, said the focus will now be on channels created by Russia to export crude without using Western service providers for shipping or insurance.

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US assistant secretary for economic policy Eric Van Nostrand and acting assistant secretary for terrorist financing Anna Morris were asked during an interaction at Ananta Centre if there had been any fresh demand for India to reduce Russian oil imports.

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“No, it’s important to us to keep the oil supply on the market. What we want to do is limit [Russian President Vladimir] Putin’s profit from it, and that’s what this policy is designed to engender,” Nostrand said.

He added, “As one of the most significant global consumers of oil, we know that the Indian economy has much at stake in the Russian oil trade, and has much at stake from the global supply disruptions that the price cap is designed to avoid.”

Morris said that since the second half of 2023, the US had detected Russian efforts to build a “shadow fleet”, or an infrastructure of ships, insurers and other maritime services with “providers with opaque ownership structures” and a history of sanctions evasion activities.

Russia’s investments diverted funds from the battlefield in Ukraine. “We’re happy to see them spending money on oil tankers and not tanks, but also importantly, it’s now time for us to respond to a different reality where Russia has created a larger channel to move oil without touching [Western] coalition services,” Nostrand said.

Soon after Russia’s invasion of Ukraine two years ago, the US and its Western partners pressured India not to buy discounted Russian commodities, especially oil and fertilisers. New Delhi, which has not publicly criticised Moscow’s actions, ramped up purchases of Russian crude and Russia soon displaced the country’s top energy suppliers such as Saudi Arabia and Iraq.

The Indian leadership has said its actions were aimed at ensuring cheaper energy supplies in the domestic market amid volatility in global markets. However, India and Russia have struggled with payments for the crude, especially after billions of rupees accumulated in Russian bank accounts in India.

The US officials declined to answer questions regarding India paying for Russian oil in currencies such as the UAE dirham and acknowledged the price cap of $60 a barrel would not apply to crude imports that did not use shipping or services from the Western coalition.

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The price cap imposed by the G7, European Union and Australia prohibits the use of Western services such as insurance and transportation when tankers carry Russian oil priced above $60 a barrel.

Since October 2023, the coalition tightened enforcement of the price cap through stringent enforcement on oil trade using coalition services and by increasing the costs for Russia to sell oil through the “shadow fleet”, Morris said. The US treasury’s department is now publicly sanctioning vessels involved in oil trade above the price cap, she said.

In February, the US treasury department designated Sovcomflot, Russia’s state-owned shipping company and fleet operator, and publicly identified 14 of its oil tankers as “blocked property”, the officials said.

Morris contended that Russian oil prices had fallen in comparison to global prices, and the discount on the loading price of Russian Urals oil moved from $12-$13 below world prices to around $17-$18 in February.

Phase two of the price cap is intended to make it harder for Russia to move oil outside services offered by the Western coalition, “thereby forcing it to sell more oil either under the cap with coalition services or importantly, offering even bigger discounts to other global buyers outside the coalition”, Nostrand said.

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