The Oil war between Russia vs USA and Europe Explained | How will it change India? : Geopolitics

Price Cap War Russia Vs Europe

Starting from 5th of December 2022 the European Union implemented a master plan to imposed something called the oil price cap on Russia whereby they would limit the purchase of oil at 60 dollar a barrel and this his sent yet another shockwave all across the world .

Because in response to that Russia has announced a ban on all oil exports to G7 and all other countries that follow this price cap. This is what marks the beginning of yet another round of economic warfare between Russia and eight it the most powerful countries in the world including Canada , France , Germany , Italy , Japan, UK , US and even Australia.

And just like the gas war and sanctions this economic battle is going to have a lasting impact on India , China and every other country in the world . And India literally stands on the thin line of diplomacy between these critical economic warfares .

So the question is what is this price cap strategy and how does it work ? What is Europe plan to paralyze the Russian oil power . What is Russia doing to counter Europe and the war in Ukraine and most importantly how will this economic warfare effect the Indian economy ?.

Before we start here is a quick summary of what exactly happened since the Russia-Ukraine war started in February 2022.

(1)Russia invaded Ukraine. (2) EU , UK & US sanctioned Russia so that they can the economy of Russia and force them to withdraw . (3) Since more than 40 percent of Europe oil came from Russia , Russia took advantage of it and started decreasing the supply of oil as a result the oil price is spiked and as you can see from this graph the oil price went from seventy dollars a barrel in November to more than 116 dollars a barrel in July 2022.

So guess what Russia was making more money after the sanctions than before the sanctions because now they could sell less oil at almost double the price . The graph said that the average revenue of Russia during the normal years from march to July was close to 50 Billion dollars but in twenty 2022 this revenue has almost doubled to more than 90 Billion dollars .

So you see Russia major source of income which is oil that is still making of them 20 Billion dollars every single month. So Europe sanction are So you see Russia major source of income which is oil that is still making them 20 Billions dollars every single month. So Europe sanctions are not helping at all in fact they are backfiring heavily on Europe. This what its look like .

“Inflation in the United Kingdom has surged to a new 40-year high and is now double digits. Britain is now facing rising food prices a worsening cost of living crisis and a prospect of a recession” .(By Wion News)

“ A warning from the IMF Central bank interventions a disorderly currency movements.”

“Now the British pound has fallen it its lowest level ever against the US dollars.”

This is the reason why Europe and G7 countries came up with a strategy whereby they said they would join hands together to form something called the Buyer Monopoly . In simple words together they decided not to buy Russian oil above 60 dollars per barrel .

Now the question is why can’t they just ban Russian oil because 60 three percent of Russia export revenues coming from oil itself right . So if these countries stop buying oil Russia will not have the money and the war would stop isn’t it .

Well guess what Russia is the second largest producer of oil and produces over 11 percent of the entire world’s oil supply which is about 10 million barrels per day and that translates to 3 billion barrels a month . So if you see if Russia has 3 billion barrels of oil is taken out of the market it will create a 3 billion barrel of shortage .

So this way Saudi and other middle eastern countries will take advantage of it and will increase their prices isn’t it. This is exactly the reason why the oil price shot up to hundred dollars per barrel after Russia started cutting oil supply to Europe and according to JP morgan if the Russian oil is banned it is completely taken off the market the oil price will shot up to 380 dollars per barrels.

So if at 100 barrel the entire European and UK economy got shattered can you image what would happen if it hit 380 dollar a barrel . So moral of the story is that you just cannot take out Russian oil from the market . This is the reason why G7 & Australia have come up with something called the prize caller strategy whereby these countries have chosen the price camp to be 60 dollars .

And this price cap has been decided such that this price is low enough to restrict Russia income but at the same time it is still slightly profitable for Russia so that they can get incentivized to y to keep producing oil . So now Russia cost of production stands at 20 to 40 dollars a barrel and they can make a 20 to 40 profit per barrel .

This is how the price collage strategy has been deployed by G7 and Australia to curb the cost of oil but you know what this is where Russia came up with its own strategy to its oil revenues intact and this is where India and China came to Russia rescue .....................Continue Reading