US says talks with India on price cap on Russian oil ‘encouraging’

India has not made any promises on price cap but did not ‘express hostility to this idea’, US official says

US and other western countries discussed a potential price cap on Russian oil with India on 27 June 2022 at Elmau Castle, southern Germany, where the German Chancellor hosted a G7 summit (AFP via Getty)

The US treasury secretary has said talks with India to propose a price cap on Russian oil have been “encouraging” as a unified West is pushing economies to cut Moscow’s inflating oil revenues to give a potential blow to the Kremlin’s war chest.

Janet Yellen said she is feeling positive about Washington’s initiative. The topic had also dominated the G7 and G20 summits in Bavaria and Bali, which were attended by India.

“We’ll see where they come out. The conversations I’ve had have generally been encouraging,” Ms Yellen told Reuters aboard a military aircraft on her way from Indonesia to South Korea.

A price cap mechanism would work by bringing the world’s biggest economies on board that would use ways like banning insurance or financing for Russian oil shipments above a certain fixed amount. The measure will slice Russia’s profits from its oil sales after the surge in prices appeared to soften the blow of the sanctions.

Crude oil prices propelled above $120 a barrel in March following the Russia-Ukraine invasion and are expected to soar to $175 a barrel.

Russia’s most vocal adversaries, such as the US, Germany, France, and Britain, are striving to bring one of the biggest crude oil consumers, India and China, on board as their sales of Russian crude oil have almost doubled since the invasion.

It also remains a challenging task as New Delhi and Beijing, allies of Russia, have stopped short of directly calling out Moscow for the invasion but have raised concerns over the human rights situation in Kyiv.

US treasury secretary Janet Yellen speaks during a news conference, ahead of the G20 Finance Ministers (Reuters)

A senior Treasury official said India was yet to make any promise on the oil price cap, but was working with the US and had not “expressed hostility to this idea”.

Referring to the 40-year high of 9.1 per cent inflation, Ms Yellen last week said: “A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now.”

Ms Yellen said she had productive meetings with a host of countries over a proposed price cap on oil on the sidelines of G20 meeting which was also attended by Russia.

“On energy costs, I had productive bilateral meetings with over a half-dozen of my counterparts where we discussed the merits of a price cap and how it can help us achieve our goals of denying [Russian president Vladimir] Putin revenue for his war machine, while dampening energy costs,” Ms Yellen said.