India's Imports of Russian Oil Could Jump by 50% if West Imposes Price Cap, Expert Says

The G7, or the group of the world's seven richest countries, announced that it was devising another strategy to squeeze Russia's earnings from energy exports as a vast number of countries around the world defied the harshest sanctions unilaterally imposed by the West in response to Moscow's special military operation in Ukraine.

The United States has started discussing "specifics" with India to restrict Moscow's energy revenue by imposing a price cap on Russian oil, Jake Sullivan, US National Security Advisor, said.

"Before it goes to leader-to-leader level, we need to work through the details with their team basically at the Cabinet level, which is where it is right now. And then, if necessary, it can be elevated," Sullivan added.

However, despite being a close partner of the US, India stood firm against unilateral anti-Russia sanctions imposed by the West. Prime Minister Narendra Modi conveyed to the developed countries at the G7 Summit that New Delhi will continue to put its national interests in the oil trade first.

Indian experts believe that any price capping on Russian oil would prove counter-productive for the West.

"A price cap on Russian oil will increase demand from Indian refiners. It may go up by 50 percent," Anuj Gupta, vice-president of IIFL Securities Ltd, told Sputnik.

As Russia has reportedly offered around a 30 percent discount on global oil prices, Indian refiners are negotiating long-term contracts with Russian upstream companies.

India, the world's third-biggest oil-importing and consuming nation, increased its imports of Russian oil by 50 times compared with levels before the Ukrainian crisis, importing around 25Mln barrels of "discounted" Russian oil in May.

US Treasury Secretary Janet Yellen had said on Tuesday that a price caps could be achieved through a mechanism to restrict or ban insurance or financing for Russian oil shipments above a certain amount. Experts say this approach will further inflate crude prices, hovering at present around $120 per barrel, for weeks.

Professor Brahma Chellaney, one of India's most eminent writers on geostrategic affairs, reckoned that a price cap would allow the US and other oil producers to profit from energy prices which have been driven higher by sanctions.

"Any increase in global oil prices will prompt Indian firms to divert their imports towards Russia; even if supply increases in other parts of the world," Gupta underlined.

On 9 June, US energy security envoy Amos Hochstein said that he believes there is a "ceiling" to how much oil India will buy from Russia, though he wouldn't provide further details.

New Delhi, on the contrary, maintained that firms could choose the best oil offered by oil producers of any country, indicating no specific message delivered to oil refiners. At the same time, the Indian government sought to remove sanctions on Iranian and Venezuelan oil to provide more options to buyers.

France, on Monday, urged the international community to explore all options, including removing the ban on Tehran and Caracas, to ease oil prices.

Amit Bhandari, Senior Fellow at Mumbai-based Gateway House, observed that removing the ban will not immediately increase the supply.

"In case of Venezuela and Iran, even if sanctions are relaxed, it will not mean an immediate inflow of oil into the global markets. Venezuela's oil industry has also suffered mismanagement for several years - it will be difficult to scale up output at a short notice," Bhandari, who wrote 'India and the Changing Geopolitics of Oil', told Sputnik.

Iran and Venezuela were the traditional oil suppliers to India. India spent $119.2Bln on oil last year, up from $62.2Bln in 2020.

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