By Express News Service
NEW DELHI: In a bid to weaken Russia’s potential to fund the Ukraine struggle, the Group of Seven (G7) leaders on Tuesday agreed to develop a value cap mechanism for Russian oil. According to studies, the G7 leaders mentioned the US’ suggestion {that a} value cap determined by consuming nations be imposed. While the contours of the scheme haven’t been introduced, studies say Moscow might be allowed to get better manufacturing value and earn a really small revenue for its petroleum merchandise.
For India, which at present imports 10% of its complete crude necessities from Russia, the transfer might be helpful as it should assist fight inflation. Before the Ukraine struggle, India used to import simply 0.2% of its complete oil wants from Russia. As the western nations put sanctions on Russian oil, Moscow began providing deep reductions for its merchandise.
Thus, Indian Oil Marketing Companies bought Russian Ural crude oil at reductions as excessive as $30 per barrel. Reports say 40% Russian oil was bought by non-public corporations together with Reliance Industries and Rosneft-backed Nayara Energy.
However, specialists say consuming nations can’t implement such a value ceiling. “Russian oil is anyway available at $30-35 discount to India. Even if G7 imposes a ceiling on paper, there will be significant leakages as witnessed from Europe’s so-called ban on Russian energy. I don’t foresee any major shift in India’s import bill with a price ceiling on Russian crude,” mentioned Debopam Chaudhury, chief economist and head of analysis at TruBoard Partners.
Russia produces round 11 million barrels per day of crude oil, and exports 5-6 million barrels per day. Moscow earned round $110 billion in 2021 from oil exports, which accounts for 45% of its complete revenue in 2021.
Past instance
The same mechanism was launched in 1995 as a part of the oil-for-food programme by the UN to permit Iraq to promote oil in change for meals and drugs. However, the programme was mired in widespread corruption