As sanctions for war increase in Ukraine, Russia turns to India to sell oil and weapons

New Delhi agreed to buy 3 million barrels of Russian crude oil at a big discount, and trade between the two nations is likely to touch another crucial area in the coming months: defense

Compartir
Compartir articulo
Russia's President Vladimir Putin shakes hands with India's Prime Minister Narendra Modi ahead of their meeting at Hyderabad House in New Delhi, India, December 6, 2021. REUTERS/Adnan Abidi
Russia's President Vladimir Putin shakes hands with India's Prime Minister Narendra Modi ahead of their meeting at Hyderabad House in New Delhi, India, December 6, 2021. REUTERS/Adnan Abidi

When Russia faced international condemnation and sanctions after President Vladimir Putin launched his invasion of Ukraine on February 24, India remained out of diplomacy.

Now, when those economic sanctions begin to take effect, Moscow is resorting to India again.

India, the world's largest oil importer behind China and the United States, agreed to buy 3 million barrels of Russian oil at a steep discount, an Indian official said on Thursday. The purchase, which was first reported by the Wall Street Journal, is relatively small given Russian production and Indian demand. But the volume could increase in the coming months and reinforce a growing perception that India is determined to preserve its extensive commercial and military ties with Moscow, even as the United States and its allies urge governments around the world to isolate Russia.

In addition to the oil deal, the Indian government is also exploring ways to maintain trade with Russia by reviving a Cold War-era agreement called rupee-ruble trade, according to two other Indian officials with knowledge of the matter. The mechanism, which would be similar to a general ledger of trade between the two countries, would allow Indian and Russian companies to do business by avoiding the need to use US dollars, the predominant currency of international trade, and reducing the risk of possible US sanctions.

The three Indian officials spoke on condition of anonymity to discuss a sensitive matter. “Eighty-five percent of India's oil comes from imports, so we're always looking for good options,” said one official. “If that includes a good package from the Russian side, and there is no impediment to buying from Russia, then let's accept it.”

Infobae
India, the world's largest oil importer behind China and the United States, agreed to buy 3 million barrels of Russian oil at a great discount (REUTERS/Francis Mascarenhas/File Photo)

Indian officials characterized ruble and rupee ledgers, which are likely to be set up in Russian and Indian banks that are not exposed to the US financial system, as a solution to help the Indian economy and its exporters rather than a way to evade potential US sanctions. India trades with Iran, another country under US sanctions, using a similar trade agreement between riyal and rupee.

In recent weeks, India received condemnation from some US lawmakers after it repeatedly refrained from criticizing Russia at the United Nations. But officials in the Biden administration often failed to criticize an Asian giant that is considered a crucial part of its strategy to counter China.

On Tuesday, White House press secretary Jen Psaki told reporters that she did not think Indian purchases of Russian oil violated existing US sanctions.

“But also think about where you want to be when writing history books about this moment,” added Psaki, without explicitly naming India. “To support the Russian leadership is to support an invasion that is obviously having a devastating impact.”

India's special relationship with Russia was highlighted this month when the Russian army gave India “special information” about when and where its stranded citizens should flee the besieged Ukrainian city of Kharkiv, while Russian military officials offered to remove Indians, specifically, from the war zone.

India is not the only country that has trade relations with Russia. Many European countries, including US allies. In NATO, they continue to buy Russian energy despite the fact that the United States and Britain have announced domestic bans. And India's oil purchases would probably not amount to a game-changer for Putin's war effort. Russia's largest customers are Europe and China; India accounted for about 3% of Russia's exports in 2021 and sources most of its oil from the Persian Gulf, according to S&P Global Commodity Insights.

Infobae
Many European countries, including US allies. The US in NATO, continue to buy Russian energy even though the United States and Britain have announced domestic bans (Natalya Chumakova/File Photo)

But the cooperation of the two countries in the energy sector has deepened in recent years. In 2016, Indian Prime Minister Narendra Modi and Putin oversaw a $13 billion deal between Rosneft and a refinery in Modi's home state of Gujarat, which represented the largest injection of foreign investment in India's history and Russia's largest exit deal. Meanwhile, Indian energy companies have invested $16 billion in Siberian oil fields.

As oil purchase talks intensified last weekend, Russian Deputy Prime Minister Aleksander Novak called on India's Oil Minister Hardeep Singh Puri to express Russia's interest in “further attracting Indian investment to the Russian oil and gas sector and expanding the networks of sales of Russian companies in India”., according to a statement issued by the Kremlin.

Puri told the Indian parliament this week that Modi's administration was working hard to keep gasoline prices low and was in talks with “all levels” of the Russian government over an agreement. For the rest, the Indian Ministry of Oil has not commented publicly on the matter.

Many executives and observers of Indian industry argue that it would be unfair for the West to pressure India to abandon Russian oil. The European Union said this month that it would abandon Russian energy “as soon as possible”, but large countries that depend on Russia, such as Germany, have not cut imports immediately.

“Has Europe or any other major Russian oil and gas consumer already reduced its consumption?” said Subhash Kumar, former president of India's state-owned Petroleum and Natural Gas Corporation, the country's largest crude oil company. If India, which is not involved in the conflict in Ukraine, did not buy Russian oil at a discount, there would be other buyers on the market, he said.

Infobae
A refinery in Omsk, Russia (REUTERS/Alexey Malgavko)

Other prominent commentators have warned against proceeding with purchases, mainly because of their optics. “From a moral standpoint, the decision to buy Russian oil and gas at a reduced price due to the crisis in Ukraine could be questionable,” Vikram Singh Mehta, former CEO of Shell India and former president of the Brookings Institution Indian division told local media this week.

In the coming months, India's trade with Russia is likely to continue in another crucial area besides oil: defense. Largely as a legacy of the Cold War, when the Soviet Union gave India everything from help installing steel plants to blueprints for MiG fighter jets, about 85% of Indian weapons today come from the Soviet Union or Russia, according to a 2021 analysis by the Stimson Center, a non-partisan group of experts in Washington.

Amit Cowshish, a retired Indian Ministry of Defense official who previously oversaw India's military acquisitions, said the armed forces would be severely paralyzed within a year if India could not trade with Russia.

“There are ammunition, subassemblies, critical licenses, all of which will run out, and it would not be in the interest of the US. The US see an Indo-Pacific partner paralyzed or alienated by sanctions,” he said.

So far, officials in the Biden administration have avoided criticizing India's ongoing relationship with Russia. During a House Armed Services Committee hearing last week, lawmakers asked Ely Ratner, the Indo-Pacific Undersecretary of Defense for Security Affairs, who has advocated a tougher US stance against Beijing, why India was not on the West's side in the Russian invasion of Ukraine.

“We recognize that India has a complicated history and relationship with Russia,” Ratner replied.

India is trying to diversify away from Russia, but it will take time, Ratner added. “From the perspective of the United States,” he said, “India is an absolutely essential partner as we think about our strategy in the Indo-Pacific.”

Keep reading: