Context

US is urging India to maintain the implementation of the oil price cap aimed at limiting profits to Russia, while also promoting stable global energy markets.

1: Dimension- Price Cap and Objective

• Following Russia's invasion of Ukraine, the G7 nations, the European Union, and Australia jointly implemented a price cap.
• The price cap is helping maintain a steady supply of energy to global consumers and businesses, and providing key importers like India with more leverage to drive steeper bargains.
• At the same time, the price cap, along with key sanctions enforcement measures, is reducing Russia’s profits from selling that oil.
• India, which was the top buyer of Russian oil in 2023, has been heavily criticised for its continued purchase of discounted oil from Moscow.

2: Dimension- Impact of price caps

The imposition of price caps due to Western sanctions on Russian oil significantly impacts India's oil trade with Russia in several ways:

• Supply Disruption and Dependency Concerns: Price caps may disrupt the steady supply of crude oil to India, which heavily relies on imports to meet its energy needs.
• Economic Impact and Trade Relations: It could lead to increased prices for Indian importers, resulting in higher costs for refining and production. This may strain India's trade relations with Russia, as the country seeks cost-effective energy sources to sustain its economic growth and development.
• Diversification Efforts and Strategic Considerations: It may prompt India to accelerate its efforts to diversify its oil imports, reducing reliance on Russian oil and exploring alternative markets.
• Impact on Bilateral Cooperation: The imposition of price caps could affect bilateral cooperation between India and Russia in the energy sector, potentially leading to renegotiations of existing agreements and contracts.
• Global Energy Market Dynamics: It can contribute to volatility in the global energy market, affecting oil prices and supply chains worldwide.