India and China increase imports of Russian oil. That is why it will not be enough for Russia

The Russian oil and gas are finding new homes, away fromEuropein the Indo-Pacific region. China and especially India are buying crude oil from Russia at an unprecedented pace: has the western price cap failed?

In December the nations of the G7Europe and Australia have agreed a maximum price on Russian oil. This move was immediately countered with a decisive block on crude oil exports from Moscow.

The maximum price is set at 60 dollars a barrel but it also has a flexible clause in the event of large variations in the market price. In any case, the oil sold at the maximum price is a lot cheaper than that sold at current market conditions.

As of Wednesday morning on Brentthe international benchmark for crude oil, is at $80.56 per barrel, 20 dollars more than the maximum price. Western nations had hoped that international oil prices would fall enough to cut off Russian revenue, but that was not the case.

With the European market closed, Russia she turned east to maintain her revenues. Although they will hardly be able to replace the exports they had before the war.

India and China: high demand, low price

Neither China nor India they agreed on the maximum price imposed by the West, though not for lack of effort. The United States they have been trying for months to get India involved, but without success.

India needs Russian oil for its industrializationwhich had been previously tampered with by Western colonization. New Delhi sees no reason to further delay its industrialization because of a war on the other side of the world. So despite their close relationship with the US, India will continue to buy oil from Russia.

The problem for Russia is that India is far away and there are no pipelines which connect it directly. This means that the only viable option is send oil by ship at Russian expense. The icebreakers loaded with crude oil leave the port of Murmansk, near the Russian-Finnish border, enter the Mediterranean, cross the Suez Canal and, after a long journey, finally reach Cochin.

India and China, despite their high need for oil, can afford to lower prices. Russia is also in dire need of keep their economy goingespecially as the war in Ukraine continues to rage.

In fact, the China has already struck a deal with Russia for one discount of $6 a barrel. After including the transportation and discount costs, the total price is approx 70 dollars per barrel: above the maximum price, but still not enough to rebuild the Russian economy.

So, for now, the Western price cap can be said to have worked. Maybe not to the extent the Europeans hoped for, but it’s certainly inflicting damage to Russia.

Article published on Money.it international edition on 2023-01-11 11:13:23. Original title: India, China increase Russian Oil imports. Here’s why it won’t be enough for Russia