INDIA’S RESPONSE : A CLASSIC EXAMPLE OF DIPLOMATIC BALANCING.

G7 countries have decided to implement an oil price cap on Russian crude oil. The rate at which oil will be capped is still not decided. G7 countries are right now rallying countries across the world to join their proposal to limit Russian source of funding the war in Ukraine. Russia has warned that it will not export any crude oil to all the countries that agree on the oil price cap.

Basically what an oil price cap means is that any shipment carrying Russian oil billed at say anything more than $60 a barrel (for example) will not be insured by Western companies. Around 90% of maritime crude oil insurers are located in the West. So if Russia tries to sell it’s oil at say $80 a barrel, no insurance company will insure the shipment & hence the buyer country will be at a risk of losing money in case the shipment is damaged enroute it’s delivery. Hence, less countries will be willing to buy the oil from Russia.

Now US wants India to be a part of this proposal. India has replied saying that it will agree only if it gets a surety of supply from USA. What this basically means is that if India has to stop buying Russian oil, India wants US to make sure it has enough Venezuelan or Iranian oil in the market to buy. Venezuelan & Iranian oil right now is sanctioned by USA. So in a way, India is saying that look, we will not buy Russian oil if you allow other streams of oil to flow in the market at the same rate. Since Iran Nuclear Deal is hanging, it will be tough for US to lift sanctions from Iranian oil at once and allow it to flow to India. Hence, India has kept all it’s options to buy oil open.

Diplomacy at it’s best!