China, India can form oil buyers’ bloc: experts
China and India have a good chance of working together to form a buyers’ bloc in the wake of a US decision to stop exempting several oil-importing countries from its sanctions on Iran, Chinese analysts said.
The vision of a buyers’ bloc took its first step as the two Asian neighbors went ahead to set up a joint working group on energy recently, according to Indian financial website livemint.com.
The joint efforts to address the key issue of energy come amid ever tighter US government sanctions against Iran and production curbs by the Organization of Petroleum Exporting Countries (OPEC). Global oil prices have gyrated following the US announcement on April 22.
The US waiver, which ends on Thursday, will affect China, India, Japan, South Korea and Turkey. China is currently the largest buyer of Iranian crude oil.
Some Indian experts, including Jawaharlal Nehru University Professor Srikanth Kondapalli, have argued in favor of setting up such a bloc and cited the strength it will wield.
Kondapalli, chairman of the Centre for East Asian Studies, told the Global Times in a recent interview that “the world’s largest crude oil importers have so far not formed any clubs. China and India should do so to grab more bargaining power to make oil prices more sustainable.”
Kondapalli said that during the 2009 Copenhagen climate talks, the US had no choice but to back down on its intentions when China and India formed a united front.
China and India, the world’s top oil importers, wield enormous buying power on the global energy stage..
Jin Lei, an associate professor at the China University of Petroleum, said although China and India have different interests, the chance of them forming a purchasers’ bloc is high. “OPEC was born out of a time of crisis. Something could be born out of the current situation,” Jin said. “But the founding parties will need to solve issues such as the positioning of such a bloc and how can it play an effective role to intervene in global crude oil pricing.”
An oil buyers’ cartel will need participating countries to have a workable, unified payment system and a successful futures trading platform with its price-discovery function.
“If crude oil importers only try to use a cartel to resist international oil price hikes, their efforts would come to nothing. A futures trading house and agreed-upon settlement currencies, however, will give importers a unified power to be reckoned with by oil producers,” Jin said.
India’s rupee and Russia’s ruble are too volatile to be used as settlement currencies, but the euro and the yuan could serve this purpose. “With the crude oil futures being traded on the Shanghai International Energy Exchange and the stable yuan, China has a big role to play in such a buyers’ bloc,” Jin said.
China’s Foreign Ministry last week criticized the US decision, and urged the US to seriously respect China’s interests and concerns and refrain from taking wrong actions that damage China’s interests.
Foreign Ministry spokesperson Geng Shuang said China “firmly opposed” the US actions. Geng added that cooperation between Iran and the international community, including China, “must be respected and protected.”
During the Second Belt and Road forum, Russian President Vladimir Putin said that Russia is willing to accommodate China’s demand for oil. However, Putin said Russia will keep limiting output under an OPEC+ pact.
Source: Global Times