Although India and China have not agreed on a western maximum price for Russian oil, this measure will still hurt Russia. Here why.
The Russian oil and gas are finding new homes, far fromEuropein the Indo-Pacific region. China And, especially India are buying crude oil from Russia at an unprecedented pace: has the western price cap failed?
In December, the nations of the G7Europe and Australia have agreed a maximum price in Russian oil. This move was immediately countered with a decisive block on crude oil exports from Moscow.
The maximum price is fixed at 60 dollars a barrel, but there is also a flexible clause in case of large variations in the market price. In any case, oil sold at the maximum price is very cheaper than sold under current market conditions.
Since this Wednesday morning brentinternational benchmark for crude oil, is in $80.56 per barrel, 20 dollars more than the maximum price. Western nations expected that international oil prices would fall enough to cut the Russian recipe, but that was not the case.
With the European market closed, Russia she turned east to keep her recipes. Although they are hardly able to replace the exports they had before the war.
India and China: high demand, low price
Neither China nor India they agreed to the maximum price imposed by the West, though not for lack of effort. The U.S they have been trying for months to get India involved, but to no avail.
India needs Russian oil for its industrializationthat used to be adulterated by western colonization. New Delhi sees no reason to further delay its industrialization because of a war on the other side of the world. Thus, despite its close relationship with the US, India will continue to buy oil from Russia.
The problem for Russia is that India is far away and there are no pipelines that connect you directly. This means that the only viable option is ship oil by ship at the expense of Russia. The icebreakers loaded with crude oil leave the port of Murmansk near the Finnish-Russian border, enter the Mediterranean, cross the Suez Canal and, after a long journey, finally arrive in Cochin.
India and China, despite their great need for oil, can afford to lowest prices. Russia also urgently needs keep your economy runningespecially as the war in Ukraine continues to rage.
actually the China has already closed an agreement with Russia for a $6 a barrel discount. After including shipping costs and discount, the total price is approx. 70 dollars per barrel: above the maximum price, but still insufficient to rebuild the Russian economy.
So, for now, it can be said that the western price cap has worked. Perhaps not to the extent that Europeans had hoped, but it is certainly causing damage for Russia.
Article published in the international edition Money.it on 2023-01-11 11:13:23. Original title: India and China increase oil imports from Russia. Here’s why it won’t be enough for Russia
Source: Money It