US wants India to join crude oil price cap coalition

The US on Friday urged India to join a crude oil price cap coalition that is being put together across the world to deny Russia access to resources gained by it from oil supplies to prop up their economy and further their unjust war with Ukraine.

“If India were to join the price cap coalition, they could work with members in the coalition in setting the crude oil price. Fundamentally our goal here is to ensure India has the access to cheapest possible oil they can,” Wally Adeyomo, US Deputy Treasury Secretary said here after a meeting with Union Finance Minister Nirmala Sitharaman.

Asked if he had a commitment from Sitharaman on this proposal, Adeyomo, who is on his first official visit to India post the pandemic, said that he had a “constructive” conversation with her on the price cap coalition proposal and that he was committed to having further conversations on this matter.

He said that the goal of the price cap would be to lower the price that India pays for oil. “We think India and the US are paying too much for energy today because of Russia’s unjustified war on Ukraine. What the price cap seeks to do is to make sure that India as part of this coalition can demand the lowest possible price from Russia while still having a price that would continue to encourage Russia to produce,” he said.

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Elaborating on the price cap coalition proposal, Adeyomo said that the US through this coalition wants to make sure Russia is not gaining an advantage because of the price premium they have created in the marketplace while encouraging them to produce at a price that is the price for Indian consumers. “Ultimately, we have aligned with India that their consumers get the best price possible,” he said.

What a price cap coalition would do

Adeyomo said that the price cap would allow American and European services from around the world to continue to be used for the purchase and transportation of Russian crude on the sea at a price below a certain level. That level would help deny Russia the extreme promise they have made due to the war with Ukraine that they have started.

“Our overarching objective is to ensure we reduce Russian revenues by allowing supplies to flow into the marketplace. It is in the best interest of people to get energy at the lowest cost possible and also to deny Russia the revenues that they can use to prop up their economy and further the war in Ukraine. The goal ultimately is to try and build out a coalition that is going to join us in building the price cap. A number of countries are negotiating lower prices with Russia today because Russia wants to try and negotiate entry into long-term contracts ahead of the coalition,” he said.

He made it clear that the objective of the price cap coalition is not to encourage Russia to shut down oil production. “This coalition will set the price above the cost of production in Russia so that we continue to encourage Russia to produce”

Adeyomo said that the reason for his visit here is to deepen the economic relationship with India. “The relationship with India has been stronger than ever before and we want to strengthen them even more,” he said.

During his meeting with Sitharaman, Adeyomo discussed several strategic issues (besides the price cap coalition) including climate change and its financing, further developing the relationship between QUAD and giving give a boost to IPEF.

“US and India are long-term partners and there are a number of challenges that we need to deal with together. But also a number of opportunities we want to take. This will be the first of the several trips I will take to India over the next several years,” he added.

Inflation Reduction Act

On inflation, Adeyomo said that he discussed with Sitharaman the recent US passed ‘Inflation Reduction Act’ that provided for over $300 billion in investments to address climate issues.

“Inflation is a major concern for both of our countries particularly headline inflation driven by higher food and fuel prices since Russia’s invasion of Ukraine. Besides the price cap, we also discussed clean energy. Both India and US can play an important role in increasing clean energy technology. The more we can rely on clean energy better it can be for inflation as well,” he said.

On food, both countries recognised that the rising food prices are is a global phenomenon. “We talked through how multilateral development banks can help developing countries deal with food inflation and in the long term make investments to ensure better food security as well,” he said.