Russia is trying to annihilate The G7 plan to put a ceiling on the price of its oiland denying it the benefit of the billions of dollars in energy sales that saved its economy from collapsing due to sanctions.
And Bloomberg Agency quoted a Western official as saying that Russia has contacted several Asian countries to discuss long-term oil contracts that include significant reductions, according to what Al Arabiya.net has seen.
The official said initial talks to offer discounts of up to 30% to some Asian buyers may be a sign that Russia is trying to avoid G7 discussions regarding an exception to pending EU sanctions on Russian oil. This plan will allow third parties to buy Russian crude oil more easily at a low price set by Western countries.
Russia may also try to attract alternative buyers of the oil it currently sells to Europe.
Indonesia’s Tourism Minister Sandiaja Ono said in comments posted on Instagram over the weekend that Russia had offered to sell oil “at a price 30% lower than the international market price.” He added that President Joko Widodo was considering the offer, “but there was a disagreement. There are fears that we will be exposed to the US embargo.”
The sixth round of EU sanctions over the invasion of Ukraine includes an embargo on Russian oil, as well as the use by third countries of the bloc’s companies for insurance and financial services. This ban takes effect on the fifth of December, but US officials are concerned that the current framework will raise oil prices significantly and will bring unexpected profits to Russia.
Some European countries supported the idea of an exception to the ban on insurance for oil sold under an internationally set price cap, but others said such a system would only work if important Asian buyers of Russian oil, notably India, agreed to participate.
German Chancellor Olaf Scholz said that the G7 countries are seriously discussing the proposal, but it is a complex issue and will require the support of other countries for its success.
“We are working very hard to implement this joint project,” Schultz told reporters earlier this month. However, it will not work if only the G7 countries agree to it. There are others who are wanted as partners.”
It is not clear where most Asian countries stand in the plan, but a few have publicly expressed their support. India is also reluctant to join the price cap scheme, as it fears losing the opportunity to buy discounted Russian crude.
US Deputy Treasury Secretary Wali Ademo is in India this week to meet with government officials and executives, including in finance and energy, for discussions on energy security, climate finance, and clean energy technology.
Adeemo said at an event in Mumbai on Wednesday that the alliance for capping Russian oil prices has expanded and a number of countries have joined in, adding that he “will not advance before the alliance announcements.”
Officials pushing the plan want to put it into practice before EU oil sanctions start in early December. Treasury Secretary Janet Yellen argued that setting a price cap would deprive Russian President Vladimir Putin of much-needed revenue while keeping oil prices low globally with EU sanctions.
G7 officials are still trying to work out details of how the price cap will be set, and officials say transparency will be key. Supporters of the plan argued that even if the major countries did not formally join a price cap alliance, the arrangement might help reduce Russia’s revenue because these countries would still gain additional leverage with Moscow to negotiate more favorable oil contracts.
“I don’t think it’s an on-off switch,” Columbia Climate School founding dean, Jason Bordoff, said in an interview. “The more countries that are members of the alliance, the greater its influence, and the result will be very modest if you don’t have the big countries as part of the alliance.”
For the EU to adopt the price cap scheme, the bloc would need to adjust its sanctions package, which was only approved following a long and difficult debate last spring.
But Hungary, which has maintained closer ties with Russia, halted the deal for weeks as the bloc tried to reach an agreement on targeting Russia’s energy sector. Budapest has indicated that it will oppose any oil price ceiling, according to the person, indicating another potentially embarrassing political battle.