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Russian crude breaches G7 price cap, puts India in a trade predicament - Times Now

Times Now · last updated July 16, 2023 – 11:06 AM

Russian crude breaches G7 price cap, puts India in a trade predicament | Economy News, Times Now

Russian crude breaches G7 price cap, puts India in a trade predicament

Russian crude oil, Urals, has surpassed the G7's price cap of $60 per barrel for the first time, causing a predicament for India, one of its major importers. Settling trade in US dollars becomes difficult, leaving paying in Chinese yuan as the alternative option

Russian crude breaches G7 price cap, puts India in a trade predicament

Photo : ANI

Russian crude oil, known as Urals, has surpassed the

G7's price cap of $60 per barrel, creating a challenging situation for one of its major importers, India. This breach has left India in a bind as settling trade in US dollars may become difficult. As a result, India is now considering the alternative of paying in Chinese currency, yuan.

India, along with China, has been one of the dominant buyers of Russian crude since the OPEC+ producer limited sales to other purchasers. However, the recent surge in Urals prices has compelled India to contemplate tougher negotiations with banks that finance oil cargoes.

According to a report, settling payments for Russian crude in dollars may no longer be an option for India due to the breach of the G7 price cap. As an alternative, yuan payments are being considered. However, India may hesitate to authorize its Public Sector Undertakings (PSUs) to make payments in yuan, as it does not want to contribute to strengthening the Chinese currency, the report stated.

The value of Urals crude has risen alongside other medium sour crude grades following the commitments made by Saudi Arabia and Russia to cut crude output by 1 million barrels per day and exports by 500,000 barrels per day respectively, starting in August. Additionally, an ongoing dispute between Turkey and Iraq, which has blocked around 450,000 barrels per day of sour Kurdish crude flowing through Ceyhan, is further supporting the prices of sour crude.

India had shifted to making payments for Russian crude in the Indian rupee after Russia was banned from using the US dollar-dominated global payments systems in the aftermath of the Ukraine war. However, this move presented its own challenges as the demand for Russian goods in India exceeded the demand for Indian goods in Russia, resulting in billions of Indian rupees being stuck in Indian banks.

To address this issue, reports suggest that India began making approximately 10 percent of its payments for Russian oil in Chinese yuan, while the rest continued to be paid in Indian rupees.

The imposition of Western sanctions and the caps on oil prices following Russia's invasion of Ukraine have significantly impacted the way India meets its crude oil requirements, leading to a series of adaptations in its payment methods and negotiations with banks.

As the situation evolves, India will need to navigate carefully to find a feasible solution that maintains its energy trade relationship with Russia while safeguarding its economic interests.
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