‘India keen to learn more about price cap compact for Russian fuel’: U.S.

Even countries that don’t join the coalition will benefit from the transparency, says U.S. Treasury Secretary

Updated - August 26, 2022 10:35 pm IST

Published - August 26, 2022 09:25 pm IST - NEW DELHI

Deputy U.S. Treasury Secretary Wally Adeyemo.

Deputy U.S. Treasury Secretary Wally Adeyemo. | Photo Credit: Reuters

India has evinced interest in learning more about joining the global price cap coalition proposed by the G7 countries to rein in Russian fuel prices, deputy U.S. Treasury secretary Wally Adeyemo said on Friday, emphasising that even countries that don’t join the coalition will benefit from the transparency it will create about prices paid for Russian crude oil.

“The value proposition is simple,” said Mr. Adeyemo. “Ultimately, countries shouldn’t have to pay more for crude oil because of Russia’s war in Ukraine. We want to ensure that Russia would have to sell into the price cap coalition so we are going to take away the excess revenues they are earning because of the risk premium they have created in the market,” he added.

As per a plan mooted by the G7 nations, a price-capping mechanism will be put in place for Russian oil exports before December 5, after which European services providers intend to stop providing insurance cover for Russian crude oil transportation by sea.

“What the price cap exception does is you can still use European services if you are buying the Russian oil shipments underneath this price,” the visiting US official said, adding that Europe has almost 90% of the market for such insurance services.

Mr. Adeyemo, who met Finance Minister Nirmala Sitharaman on Friday, said that Indian policymakers he had met with and discussed the price cap idea ‘are very interested in learning more about the details’ because their primary objective is to buy energy at the cheapest price possible for Indian consumers and businesses. 

“So we are providing them with information, we are going to continue the conversation with them going forward, but we see an openness to having that conversation,” he said.   

The price cap, the deputy secretary stressed, is just a tool to meet the ultimate goal of reducing Russian revenues while keeping fuel supplies running. 

“We want as many countries as possible to join the price cap coalition. But we will also be happy if countries, based on the price cap, negotiate a lower price with Russia. We are going to be transparent about where we will set the price because one of the challenges today is that no one knows the price countries are paying for Russian oil. No one knows what India, Indonesia or China is paying,” he pointed out.

While the price cap coalition will set a price above Russia’s production costs, below which countries buy oil, Mr. Ademeyo noted that even countries outside the coalition can use the price cap while negotiating with Russia. “They can say, we know you sold your last barrel of oil at say $60 or $55, so this is what we are willing to pay,” he pointed out.

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