Bessent’s Call for Stricter Russian Oil Sanctions

Why in the news?

Scott Bessent, U.S. Treasury Secretary nominee, emphasized tightening sanctions on Russia’s oil sector to pressure Moscow over the Ukraine war. This move could significantly affect India’s oil imports and efforts to internationalize the rupee.

Bessent's Call for Stricter Russian Oil Sanctions

Tighter Sanctions on Russian Oil:

  • Scott Bessent, nominee for S. Treasury Secretary, supports stricter sanctions on Russia’s oil sector if requested by President Donald Trump to help end the Ukraine war.
  • Recent Biden administration sanctions target 183 tankers involved in Russia’s “shadow fleet,” significantly affecting Indian oil imports.
  • India’s reliance on Russian oil has grown to 38% of total imports, offering cost and reliability
  • The impact of sanctions will depend on the Trump administration’s implementation.

Challenges for Rupee Internationalization

  • Stricter S. sanctions hinder India’s efforts to settle oil trade with Russia in rupees.
  • Rupee trade has seen limited success, while yuan-driven Russia-China trade boosts the Chinese renminbi’s global footprint.
  • Bessent reinforced the dollar’s dominance as the global reserve currency, reflecting U.S. resistance to currency shifts.
  • Discussions on alternative currencies within BRICS nations intensified after Russia’s removal from SWIFT in 2022.

India’s Response to Sanctions

  • Indian refiners are rushing to complete payments for Russian crude to avoid disruptions.
  • Payments to Gazprom Neft and other Russian entities are increasingly settled in rubles.
  • The $60 per barrel price cap on Russian oil by Western nations (effective December 2022) aims to limit Russia’s revenues.
  • The U.S. set a February 27 deadline for crude shipments on sanctioned vessels loaded before January 10.

Sources Referred:

PIB, The Hindu, Indian Express, Hindustan Times