(Bloomberg) --
The US never expected India to stop importing Russian oil as it's in Washington's interest to keep energy flowing to prevent any supply shocks caused by the Ukraine war, US Treasury Assistant Secretary for Economic Policy Eric Van Nostrand said.
“What the sanction regime intends to do is to reduce Putin's revenue,” Van Nostrand said on Thursday at an event in New Delhi. Russian oil will no longer be the same product once processed in refineries, and therefore not a target for penalties.
The trading of Russian oil is currently restricted by a strategy employed by the Group of Seven, which involves a $60-a-barrel price cap on Russian crude from December 2022. Buyers can still purchase crude above price cap, but in doing so they would lose critical western financing and insurance services for cargoes.
Russia, which prior to invading Ukraine had an insignificant role in India's oil basket, has seen exports to India swell since the start of the war and consequent Western sanctions, becoming the country's top supplier.
Despite pressures from the West and the cost of the ongoing war, Russia's oil and gas tax revenue almost doubled in March from a year earlier. The nation's producers adapted to sanctions through a large “shadow fleet” of tankers, said US Acting Assistant Secretary for Terrorist Financing Anna Morris, speaking at the same event.
The cost of Russian Urals crude fell to a $17 to $18-a-barrel discount to global prices in January and February this year, down from a $12 to $13 discount earlier.
“Russia will react to an effective price cap by continuing to invest money to avoid our sanctions, requiring us to continue to adapt and innovate in our strategy,” Morris said.
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