International observers are wondering whether the G7 plan to curb Russia’s oil revenues is sensible to begin with. Indonesian Finance Minister Sri Mulyani Indrawati told the US press on July 15 that capping Russian oil prices won’t solve the world’s energy problems.
She explained that prices are high because demand outstrips supply, which was disrupted during the Covid-19 pandemic. According to Indrawati, no price capping can solve this dilemma amid the energy crunch.
On the other hand, the G7’s price capping initiative was designed for developing countries, most notably India and China, who are continuing to buy Russia’s crude regardless of western sanctions.
However, the crux of the matter is that developing countries are already buying Russia’s oil at about $25 below Brent prices, or about $60 per barrel.
Russia has offered a sweet discount to developing countries affected by global inflation and a looming recession.
There is no need for China, India, Indonesia, or Sri Lanka to instrumentalize the G7’s price cap because it may not be any lower than what they currently pay for Russian hydrocarbons.
On the other hand, if they follow the cap they risk provoking Russia into slashing its oil output and undermining their working relations with Moscow.
According to some experts, the only incentive for developing countries to observe the cap is to maintain access to European shipping and insurance services which require the implementation of the G7 measure to transport Russia’s crude.
However, Russia is increasingly using its own fleet and insurance companies to deliver its hydrocarbons to its customers. In June, western press reported that the Russian National Reinsurance Company (RNRC) became the main insurer of Russian vessels.
In November, it turned out that Russia’s oil tankers could also be insured by IPJSC Ingosstrakh, the legal successor of the Chief Agency of Foreign Insurance of the USSR founded in 1947.
Sputnik / ABC Flash Point News 2022.