 Here watching NewsClick, this is Mapping Fortlines and today on the show, we looked at the price cap that has been that is being enforced by G7 countries, European Union and Australia on Russian oil exports. So, this is yet another move to squeeze the Russian economy and pressurize Russia to comply with the demands of US and its allies. But will this move have the desired effect? To talk more about this, we are joined by Prabhuporka Yasta. So, Prabhuporka, can you start off by telling us more about this price cap? What exactly is it? How is it being enforced? And it's been about a week since it has been enforced. What have we seen till now? Well, three questions put together as one. So, let's start with what is the price cap? The price cap is a very simple one. It's been discussed for the last two months that anybody buying Russian oil is supposed to not pay a price greater than $60. Now, you know, this is a very new, shall we say, original development in the world, that the concept of countries which have nothing to do with either the buyer or the seller, trying to dictate what the price of the goods should be. As I said, this is quite a new, shall we say, original move in the world in this sense. Because if you're a buyer, you can set the price. If you're a seller, you can set the price. If you're a cartel, you can set the price of cartel of buyers or a cartel of sellers. But three, five, six, eight independent countries sitting together and say, hey, if you want to buy his or her oil, both of you will have to only sell at below this price or buy below this price. Now this is, as I said, an unusual development in international trade. It has no legal standing. It has no basis in any international law or whatever we call the trade relationships which today are based on WTO, theoretically. So clearly what is being sought to be done is something completely new and completely out of the books, if I may say, or downright in terms of international law illegal. That is one part of it. Second part of it, how will it be executed? Russia has been sanctioned left, right and center. So Russian economy has been sanctioned again, including the expropriation of what was lying in the foreign banks. So sanctioning Russia more seems to be some completely barren exercise. And the G7, essentially the NATO and its allies understand that that they have reached the end of the road. Now they have also imposed sanctions on any financial entity which deals with Russia in violation with what the US calls the sanctions, its sanctions which are at the bone or have been at the moment largely financial sanctions. Specific Russian entities have been sanctioned, banks have been sanctioned, the central bank has been sanctioned and so on. Now the question is, sanctioning countries buying from Russia is a big ask. It means essentially sanctioning India and China, which are the biggest buyers of Russian oil for the last five, six months. So given that, this has carefully avoided that and said the sanction will be on any deals which involve this, but it will be for the maritime companies who are doing with the dealing with the soil, insurance companies and so on. Again that has limited penalty, three months. If you do it three months, ships will be barred for the next three months etc etc. So that is a separate exercise or the penalty is hard enough for it to make a difference. But it does mean a whole bunch of companies will not deal with Russian oil just because of the sheer fear that in case they are charged violating this, they will be in trouble and all the rest of the business will suffer. And proving that you haven't done it is a much more difficult ask and that's what would end up by doing that if any of these countries say you violated the sanction, then it's the onus of proof that they have not would be on the companies. So the impact of this itself would be a number of companies, shipping companies, maritime services companies, insurance companies wouldn't deal with it, but that is something that has always been a set of fleet available to do this. We have seen in this case of Iran as well that Iran has been able to maintain sanctions and able to supply oil, buy and sell, has been able to do transactions. So people have worked their way out of this. So given that as we can see immediately the impact seems to be zero. The reasons of course are two. One is of course the price of oil at the moment is below $60 and in spite of the fear that sanctions would drive up the prices, it does not happen. So that is one. The second part of it is Russia and others have been prepared for this for some time because the stocks have been around. So I think they also know how to work around these sanctions. And the third, the US also doesn't want prices of oil to go up, which will have immediate adverse effect on their economies as well. And didn't want the penalties to be there for to be given beyond the three month period. That's why they have reduced the penalties for large longer period to 30 days, 90 days. So given all of this, I think the net result is the price of oil was low anyway, so no effect. The tankers, etc., dark fleet as it is called is ready, so no effect. Maritime companies, a set of companies have been already set up to handle this, possibly by China, Russia, probably even companies in India. So they have, people have worked out a way to handle the coming G7 sanctions, which have been talked about. So they're ready for it. Will it lead to a long-term rise in oil prices as it is being feared? The question is still open. So what does happen if the prices rise again now? If the trade like we've been seeing in China, the COVID lockdown, curbs are lifting, the economy might expand, and then if the demand rises, the price might rise, what happens then? Well, it's a big if. What's going to happen in the future? Nobody knows. But there is the expectation that in the future we might see a rise in price of oil. If there's also been an opaque oil cut, though the cut is not significant, so it doesn't really have an effect on the price, then in fact the impact is really to see that there is a shortage of oil in the market by which the prices rise. The opaque doesn't want the prices to fall and opaque today means opaque plus, which includes also Russia. So there is an interest of those who are oil producers to keep the prices high. So that in fact is the bigger worry for the economy, not so much the sanctions, but is there a likely shortage of oil in the market in spite of Russia having their alternative arrangement because of the opaque price cuts. And as you said, the economy opening up again, the rebound in Chinese economy, all of this will lead to a future rise in oil price. This is the fear that is there in the market and if that happens, then of course we are going to get inflation, inflation pressures of the economy and a whole lot of cascading effects. But as you know, predicting the future and predicting the oil prices, both are extremely difficult exercises. So given this at the moment, I think we'll have to cross our fingers and hope that the oil prices remain stable for countries like India, which import a lot of oil, not having high oil prices is obviously good. But the prices are mid 80s, 90s, it affected the European economies, a whole lot of African economies, Latin American economies, India was spared a part of it because it did import a lot of oil from Russia. So given that India, I think got discounted oil, so didn't have that much of a problem, so also China. So given that lower oil prices is good for countries like India and China, but too lower price would affect the global economy in different ways. And effectively, then we might see other sets of issues come up, which is, well, what happens to the Russian economy then? And if Russian economy is squeezed further, of course they have built up the reserves again. So they're not going to be that much bothered by short slump in prices. And even if the prices of oil remain at 50, 45 to 50, even then they make a profit, this is their calculation. Anything above 45 means Russia makes profits. So given that, I don't see that this is going to be a major problem for Russia, but it is going to be a problem for countries around the world. If the prices rise beyond 60, 65, this will really create a squeeze on a lot of countries. And if it falls, then we are likely to see OPEC cut their prices again, cut their production again, because OPEC wants at least to give the prices at a certain level. So I think in that sense, this is a bit of shadowboxing in which G7 is pretending it's doing a lot of stuff. But I don't think they also want to upset the oil market significantly. Right. So in the short term, we're seeing that this move is not really having any effect. But what do you think about the long term? Will these price caps do any major damage? I think the principle of setting price caps is the big change, that here you are now as G7 saying we make the rules of the trade, not international, not WTO, not what you and the buyer and the seller decides, but we, the G7, decides what is right, what is wrong in terms of prices. I think this is something which if it fails, it will be very good for the world, because I don't think this kind of hegemonic ambitions should be exhibited by anybody, any group of countries. So I think this failure of this move is very important. If it succeeds, then I think we have a problem, not with respect to oil, but then what next? That are we going then to say, okay, we don't like India. Now what can we set a price cap on? What can be sanctioned from India? We don't even have to sanction, just set price caps. So all of these kind of issues then might start emerging, that who decides the world market price and can it be really done by fear of a few countries. So in this case, my understanding is the establishing the principle is the problem, that once this principle is accepted, they have the right to do it, and then everybody tries to see how to work within that, I think that's the problem. So I'm more worried of the political consequences of establishing a G7 price cap, rather than what effect this particular cap will have. Thank you probably for joining us today for this discussion and that's all the time we have. Keep watching news quick.