In Geopolitics This Week
The EU Imposes Price Cap on Russian Oil at $60 Per Barrel, India Assumes the Presidency of the G20, The US to Shift Missile Defences from the Middle East to Ukraine, and other stories.
The EU Imposes Price Cap on Russian Oil at $60 Per Barrel
European Union leaders have agreed on a $60 per barrel price cap on Russian seaborne oil. The idea originated from the Group of Seven (G7) nations and has been tentatively accepted with an adjustment mechanism to keep the cap at 5% below the market price.
The $60 per barrel price cap and an EU embargo on Russian crude oil will go into effect on Monday, and an EU embargo on oil products will follow in February. The G7 nations and Australia joined the European Union in adopting the price cap, hoping to reduce Russia’s state revenues and lower Moscow’s capacity to wage war.
The price cap will to prohibit shipping and insurance companies from delivering cargoes of Russian crude unless sold at or below the price set by the cap. As the world's key shipping and insurance firms are almost all based in G7 countries, the price cap gives the G7 leverage to complicate Russia’s efforts to sell its oil for a higher price. However, the cap may only have a limited impact on Russian oil revenues in the near-term. Most Russian oil is currently trading near $60 per barrel and Moscow has warned that it will not export oil to countries respecting a price cap. The decision will likely influence discussions on production levels at the upcoming OPEC+ meeting this weekend.
Russia and those importing Russian oil may soon set up their own insurance firms and operate their own oil tankers as a way to bypass the sanctions. Russia may also look to other sanctioned countries for support as both Iran and Venezuela have sustained sanctions for decades. This may lead to an increase in rogue tanker fleets with difficult-to-trace ownership.
India Assumes the Presidency of the G20
India has assumed the presidency of the Group of Twenty (G20). India will hold this position for a year, during which Prime Minister Narendra Modi will chair around 200 meetings centred around increasing global economic growth and prosperity. Next year’s G20 Summit will be held from September 9-10 next year in New Delhi.
Together, the member nations of the G20 make up more than 80% of global GDP, 75% of global trade and 60% of the world’s population. India is expected to use its chairmanship to stress the need for increased representation in multilateral bodies and enhanced roles for middle powers. Indian Prime Minister Narendra Modi has slated leading the G20 is a “big opportunity” for India to “focus on global good.”
India has interests in establishing a multipolar world and reinforcing its position as a leader of the Global South. New Delhi will hope that the chairmanship of the G20 will be a vehicle for India to move beyond its image as an emerging middle power and move toward achieving its great power ambitions by closing the gap with major powers like China. As such, promoting development on the international stage is a likely to be a top priority throughout New Delhi’s chairmanship of the G20.
The US to Shift Missile Defences from the Middle East to Ukraine
The United States is reportedly working to transfer air defence assets from the Middle East to Ukraine. The plan would see the US send National Advanced Surface-to-Air Missile Systems (NASAMS) to Ukraine in the next three to six months. The US would then replenish the systems taken from Middle Eastern partners with new NASAMS over the next 24 months, according to Greg Hayes, the CEO of Raytheon Technologies.
The plan to shift the NASAMS is designed to ensure that Ukraine has access to more of these air defence systems as quickly as possible. NASAMS can take as long as 24 months to build and Ukraine needs new air defence systems as a matter of urgency after Russia has increasingly struck its energy infrastructure with missiles and drones. Hayes has said that rerouting the systems from the Middle East would be faster than producing new ones for Ukraine, given the time needed to source component parts and deliver them.
While Hayes didn’t specify which Middle Eastern countries would provide the systems, both Oman and Qatar have previously been approved by the US to purchase NASAMS, with Oman receiving its first shipment in 2016, and Qatar's request approved in 2019. At the same time, the United States Army has been speeding up its weapons acquisition processes to speed up arms production. With bipartisan support from the US Congress, arms manufacturers are working to boost the domestic production of some military items.