Dodging EU's new crude curveball

Economic Times

4 days ago

India should be able to scale down its purchases of Russian crude-provided Opec raises output-following the EU's 18th sanctions package against Moscow, which targets Russia's oil and energy sector. The country has diversified its oil imports in anticipation of the EU move and should not find it difficult to revert to traditional suppliers in West Asia or ramp up sourcing from new suppliers in Africa and America. Opec is accelerating output hikes as it positions itself to restore market share lost on account of the Ukraine war. Non-Opec oil-producing nations are similarly placed vis-a-vis Russian energy exports.New Delhi and Moscow share a strong strategic and economic relationship, and that should ensure Russian oil will find its way to India so long as it is being exported. The two countries have acquired a degree of immunity against western restrictions on payments and maritime trade. These efforts could be taken further through an agreed price for Russian oil. Sanctions on petroleum exports by Nayara Energy, in which Rosneft has a minority stake, also lack deterrent power because those exports can easily be diverted to non-EU destinations.The EU is pursuing a course that has revealed its infirmities-particularly the lack of enforcement power over the price of oil, how much of it is pumped out of the ground and how it reaches buyers. The US has been sceptical from the outset, its misgivings arising from the prospect of de-dollarisation of the oil trade. For his part, Donald Trump favours tariffs over sanctions, and a bill making its way through the US Congress-threatening punitive tariffs on countries buying Russian oil-should have greater power of persuasion. But the bill comes up against the economic weight of BRICS, which poses a threat to the dollar's status as a reserve currency. That ought to limit the reach of US tariff action to police the global energy trade.