Sri Lanka Exploring Ways to Import Discounted Russian Oil

The island nation spends $500 million each month importing oil. This summer, massive public outrage over the forex crisis forced President Rajapaksa to quit.

Sri Lanka has held several rounds of discussions with Moscow, pursuing options for importing discounted crude oil, the country's Foreign Minister Ali Sabry said on Wednesday.

The minister of the collapsed economy also added that his government is ready to route the cheaper Russian oil via India.

“If there is a way to deal with Russian oil, why not, we want to. The kind of price escalation [in the global market], it is unaffordable for us,” Sabry said in an interview with WION.

“Disproportionately” impacted by the higher food and energy prices, the country of 22 million people facing their own foreign exchange crisis is wary of recession if Russian oil is now longer inthemarket.

The Kremlin said that Russia would stop selling oil to countries that impose a price cap — a G-7-led idea likely to be rolled out from December 5 as part of efforts to squeeze Moscow's revenues for its special military operation in Ukraine.

Despite months of deliberation, the G-7 and Australia failed to decide on the price cap level.

A US Treasury official on Tuesday said discussions are taking place among members of the European Union before the entire international "Price Cap Coalition" can announce it.

The G-7 consists of Canada, France, the UK, Germany, Italy, Japan and the US plus the European Union.

“The moment Russian oil laves the market, there will be scarcity and that will probably drive up the prices and will create economic upheaval in terms of recession or something of that sort. I don't think anyone will like that,” the Sri Lankan Minister underlined.

Higher crude and fertilizer prices, as well as the depreciated rupee, are inflicting a massive blow to agriculture, which is the lifeline of around 30 percent of the Sri Lankan population.

Last month, a report from the analytic firm Refinitiv suggested that Russia has accounted for 2.6 million barrels since May, which is about 79 percent of the total oil purchased.

The first-ever purchase of Russian oil since 2013 was made after the island nation ran out of fuel due to the foreign exchange crisis.

The island nation announced a default on its external debt for an interim period in mid-April, pending a restructuring of the obligations under the $2.9 billion IMF-supported economic adjustment program.

The World Bank estimates Sri Lanka's economy will contract by 9.2% in 2022 and 4.2% next year. A Nomura Holding report, released on Tuesday, named Sri Lanka among the seven countries with a high risk of a currency crisis.