Why India shouldn’t support a price cap on Russian energy

The European Union is considering imposing a price cap on Russian oil and gas. The G7 group of rich countries had previously proposed imposing a cap on the price of Russian oil exports. If the EU goes ahead with such a move, Russia has likely responded with a cut of all energy supplies. Russia also appears to have persuaded OPEC, the oil producer’s cartel, to cut production, and thus halt the ongoing fall in oil prices since late August.

The proposal to limit Russian crude oil prices is to take effect from European companies refusing to insure Russian cargoes of oil at higher prices and by European tankers refusing to carry Russian crude at prices above the limit. The net effect could be to create a new insurance and reinsurance business related to the export of Russian crude oil to Asia, whether in Shanghai, Hong Kong, Singapore or India’s GIFT City. Russia will divert its raw materials only to countries that are not part of an attempt to punish Russia for its invasion of Ukraine. Cutting Russian supplies of crude to Europe, which accounts for about 30% of the continent’s total imports of oil, would boost Europe’s demand for crude from other sources, raising crude prices in general and potentially those countries. which are demanding relatively access. Cheap Russian Crude.

The Czech Republic, which currently holds the rotating presidency of the European Union, is against taking up the price cap proposal at an upcoming meeting of EU energy ministers on Friday. As Russia threatens to freeze Europe this winter by halting all energy exports, if the EU imposes a cap on Russian gas prices, such a decision would be beyond the approval of energy ministers: it would be the European head of governments. Union will take summit to fix price cap on Russian gas.

Russia has already cut off supplies to Europe via Nord Stream 1, the major pipeline from Russia to Germany. Some of the gas still flows into Europe through Ukraine, and through Turkstream, a pipeline that reaches Turkey. Gas flow through Ukraine has fallen well below full capacity, and Russia, as the winter deepens, may further reduce supplies, allowing Ukraine to flow gas to Europe through its territory or through its own may force you to make a choice between using gas for use. It will be designed to incite passion in Europe against Ukraine.

Using sanctions against Russian energy, food and fertilizer to punish Vladimir Putin for attacking Ukraine would mean the whole world, especially developing countries, recovering from the pandemic with higher than needed energy and food prices. is to be punished by squeezing. Given the potential for starvation in parts of the world that relied on grain imports, the West relied on sanctions against food. Food prices have come down significantly.

Now they must rely on energy. Let oil and gas flow freely through Russia, as well as fertilizer and other goods, including an expanding fracking industry in need of America. This would reduce energy prices around the world and indirectly penalize Russia. Lower export earnings from lower prices for oil exports would hurt the Russian war effort, more than fruitless efforts to lower Russian oil prices.

If the West wants to control Russia, it must expand its war support to Ukraine: give Ukrainians more weapons such as US-supplied HIMERS (High Mobility Artillery Rocket Systems) kits, or, in an extreme case, to the West. send. Men and not only selective material to fight wars. Or should the West encourage Ukraine to sue for peace, rather than encourage Ukrainians to fight a war that is increasingly costly to Ukrainian lives and the world economy.

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