EU price cap on Russian petroleum: In a major development, the European Union, the international G7, and Price Cap Coalition on Saturday adopted further price caps for seaborne Russian petroleum products including diesel and fuel oil. Notably, the Price Cap Coalition is composed of Australia, Canada, the EU, Japan, the UK, and the US.
According to the statement released by the 27-nation bloc, the latest action came in line with a series of sanctions taken by Russia against its neighbouring nation, Ukraine. As per the statement, the decision will hit Russia's revenues even harder and reduce its ability to wage war in the war-torn nation. Also, it underscored the measure will help stabilise global energy markets, benefitting countries across the world.
Notably, the European Union and the West have imposed several sanctions against Moscow ever since it started a relentless war against Kyiv last year. Meanwhile, President of the European Commission, Ursula von der Leyen, while announcing the latest measures said: "We are making Putin pay for his atrocious war. Russia is paying a heavy price, as our sanctions are eroding its economy, throwing it back by a generation."
Watch full video of EU President here:
"Today, we are turning up the pressure further by introducing additional price caps on Russian petroleum products. This has been agreed upon with our G7 partners and will further erode Putin's resources to wage war. By 24 February, exactly one year since the invasion started, we aim to have the tenth package of sanctions in place," she added.
Maximum price for premium-to-crude products will be $100 per barrel
According to the top EU official, two price levels have been set for Russian petroleum products: one for ”premium-to-crude” petroleum products, such as diesel, kerosene and gasoline, and the other for ”discount-to-crude” petroleum products, such as fuel oil and naphtha, reflecting market dynamics. The maximum price for premium-to-crude products will be $100 per barrel and the maximum price for discount-to-crude will be $45 per barrel.
The price cap on petroleum products will be implemented from Sunday, February 5. It includes a 55-day wind-down period for seaborne Russian petroleum products purchased above the price cap, provided it is loaded onto a vessel at the port of loading prior to 5 February 2023 and unloaded at the final port of destination prior to 1 April 2023, as per the statement.
India imports 85% of its crude oil needs
It is worth noting that India is the world’s third-largest oil-consuming and importing nation. It imports 85 per cent of its crude oil needs. Crude oil is converted into fuels like petrol and diesel at refineries. However, ever since the war between Russia and its neighbouring nation started last year, the West and Europe imposed stringent sanctions on its energy. This resulted in Russia's offering more discounts to its oldest ally, India.
Will it affect India's oil market?
Amid the ongoing war between Russia and Ukraine, India has been boosting its trade cooperation, especially crude oil, with the former. According to the Commerce Ministry, Moscow has moved to the fourth position in the list of Top 10 Merchandise Import Source Nations in April-December 2022. Citing the reason behind the abrupt jump of Russia, the ministry said the import of crude oil rose significantly in the current financial year.
The Indian government has been vehemently defending its trade with Russia, saying it has to source oil from where it is the cheapest. The government has previously indicated that oil companies will continue to buy oil from Russia outside the price cap.
External Affairs Minister S Jaishankar on December 7 told the Rajya Sabha that Indian refiners will continue to look for the best deals in the interest of the country. “We do not ask our companies to buy Russian oil. We ask our companies to buy oil (based on) what is the best option that they can get. Now, it depends on what the market throws up,” he had said while replying to clarifications sought by MPs on his suo moto statement on foreign policy. Besides, on several international forums, New Delhi has defended its oil purchase from Moscow despite being brutally trolled by the EU and the West. Therefore, it is unlikely that the latest measure would affect India's oil market.
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