US urges India to join Western crude price cap coalition against Russia

US dy secretary of treasury Wally Adeyemo meet FM Sitharaman during the final lap of his three-day trip to India, after visiting RBI governor Shaktikanta Das on Thursday

With the twin objective of sharply reducing Russian revenue and stabilising global energy prices, the US on Friday urged India to join the Western price cap coalition on import of crude oil from Russia.

US deputy secretary of treasury, Wally Adeyemo, during the final lap of his three-day trip to India, met finance minister Nirmala Sitharaman after visiting Reserve Bank of India Shaktikanta Das on Thursday.

“In my conversation with Indian officials about the price cap coalition, they have shown great interest as this is in line with India's objective of lowering energy prices for consumers. We are providing information to them and we will continue the conversation,” Adeyemo told reporters.

Adeyemo said the US is “very concerned” that as the EU stops crude oil imports starting December 5, access to Russian crude may diminish for the world, and could potentially lead to higher energy prices. According to the International Energy Agency, Russia’s oil output is set to fall roughly 20 per cent by the start of next year as a European Union import ban comes into force.

“What the price cap will do is allow European and American services around Russia to be used for the purchase and transportation of Russian crude on the sea at a price below a certain level. And that level will help deny Russia the extreme profit it made due to the war in Ukraine that they have started but still promote import of crude. Our overarching objective is to ensure we reduce Russia’s revenue while allowing supplies to go on to the marketplace,” he added.

The G7 countries, which are leading the effort to build a price cap coalition, said in a statement on June 28 that the group is considering a range of approaches. These include options for a possible comprehensive prohibition of all services, which enable transportation of Russian seaborne crude oil and petroleum products globally, “unless the oil is purchased at or below a price to be agreed in consultation with international partners.”

Adeyemo said a price cap on Russian crude will work in India’s interest. “We think India, US, countries all over the world are paying too much for energy today because of Russia’s unjustified war in Ukraine. So what the price cap seeks to do is to make sure that India is in a position with countries that are part of the coalition to demand the lowest possible price from Russia while still having a price that would encourage them (Russia) to continue to produce,” he said. “So the idea here is we want to make sure that they (Russia) are not gaining an advantage in terms of price premium they have created in the marketplace while still encouraging them (Russia) to produce which will lower the prices for Indian consumers.”

However, Adeyemo clarified that the G7 countries are not trying to encourage Russia to shut down crude oil production. “The price cap coalition is going to set the price above the price of production in Russia so that we continue to encourage Russia to produce,” he said.

Without touching up on the price cap issue, India’s Ministry of Finance in a tweet said the two sides exchanged views on global economic and financial sector issues and discussed India’s G20 Presidency in 2023, as well as areas of cooperation for continued and enhanced India-US partnership.