Russia’s discounted oil to India is helping the West’s price cap sanctions on Russian oil after the invasion of Ukraine in February 2022, a US Government official said at an event discussing phase two of the price cap in New Delhi on Thursday. 

According to the Economic Times (ET), the US Treasury’s Assistant Secretary, Eric Van Nostrand, said: “We know that the Indian economy has much at stake in the Russian oil trade and has much at stake from the global supply disruptions that the price cap is designed to avoid. The price cap’s goals are to limit Putin’s revenue and maintain global oil supply essentially by creating a mechanism for India and other partners to access Russian oil at discounted prices.”

The EU, G7 countries and Australia imposed a price cap of $60 per barrel for Russian seaborne oil from 5 December 2022.

Amid sanctions by Western nations, Russia turned to neutral parties for new deals. According to Russian Deputy Prime Minister Alexander Novak, Russian oil exports to India have increased by 2,200% as of September 2023 since the Western sanctions, reported Offshore Technology

India’s Russian oil imports climbed to an all-time high of 1.4 million barrels per day (bpd) in January 2023, marking a 9.2% increase from December the previous year, with Russia becoming the top oil supplier to India as of February 2023. 

Nostrand added that: “The price cap’s first year was a successful one by those standards: global oil markets remained well-supplied while Russian oil traded at a significant discount to global oil,” according to the ET

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On 23 February, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned almost 300 individuals and entities in response to the death of Russia’s opposition politician and activist Aleksey Navalny.

These sanctions threaten Russia’s oil sales to India, making it more difficult for Indian state refiners to secure annual supply deals with its largest seaborne crude oil supplier, three industry sources told Reuters on 28 February 2024. 

“This past summer and fall, we saw Russia’s investments in new infrastructure to sell oil outside the price cap’s jurisdiction begin to bear fruit, and the discount on Russian oil narrowed. In response, the United States and the Price Cap Coalition have reinvigorated our enforcement efforts and focused on constraining Russia’s options to sell outside the price cap,” Nostrad said at the event.  

“Today, even the Kremlin has acknowledged that these efforts are forcing Russia to sell at bigger discounts to global consumers like India.”

India’s Russian crude oil imports fell for a second consecutive month in January, recording their lowest levels in a year due to tighter sanctions from the West. However, India is also in talks with Russia’s crude oil supplier, Rosneft Oil, to secure a long-term deal