India Negotiating With Russia To Buy 20 Million Barrels Of Discounted Oil And Enter Russian Markets Exited By The EU

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Russia-India Trade Ties Developing As The Ukraine Conflict Is Increasingly Seen From Asia as A European Problem To Resolve

India and Russia are engaged in talks over alternative payment mechanisms as both sides are negotiating for about 20 million barrels of crude from Rosneft at heavily discounted prices.

The demand for energy in India is acute and increases during the summer months due to the heat and the need for cooling devices. Energy consumption grew 8.9% in March over February this year and reached an all-time record of 199.58GW on April 8. Those usage records can be expected to be constantly revised upwards.

India has discounted European issues over Ukraine, increasingly seeing it as a European problem not of India’s making. India’s Ministry of Energy has consistently stated that its objective is to stabilise its economic engagement with Russia even as there is a possibility that the Western sanctions against Russia could impact India.

Ministry spokesperson Arindam Bagchi has said. “Our objective has been to see how we can stabilise the economic transactions or economic engagement that we are doing with Russia in the current context. There is a possibility that these sanctions might impact us and that is why we are having inter-ministerial discussions and other conversations to see how we can keep our economic interactions with Russia stabilised and to see how we can ensure our own interests are not affected.”

Western demands for Asian action against Russia are proving problematic as the situation was not created by Asian nations, and their energy strategies have long included Russia. India for example imports gas from Russian fields in the Arctic. Due to Russia’s continuing energy trade with the US and EU, Rosneft has several non-sanctioned intermediaries and trading companies which are in legitimate, non-sanctioned supply talks with Indian companies.

India has also shown interest in potential for shipbuilding activities in Vladivostok and Gujarat in Western India for design and building of the next generation of oil and gas tankers. Prime Minister Modi was the chief minister of Gujarat from 2001 to 2014, with the area having shipbuilding yards with an eye on not just Arctic capable shipping but also to service the International North-South Transportation Corridor (INSTC) requirements. The INSTC is a Suez Canal alternative route running maritime from Mumbai to Iran then multimodal north through Iran and onto Caspian Sea Ports to both Central Asia, the Caucasus and Europe. This ‘Southern’ route is likely to prove popular as it allows goods transit from the EU to Asia without the need to transit via Russia. India has also established the Vladivostok-Chennai maritime corridor with extensions through to Mumbai with India and Russia collaborating on Indian Ocean transportation routes to supply India and Southeast Asia with LNG supplies from the Yamal fields in the Russian arctic – along the Northern Sea Passage.

India has also shown interest in sourcing organic fertilizers from Russia, an interesting development in view of the fact that New Delhi has stated its intention for India to develop as a major grain and wheat exporter given disruptions to the global supply chain created by the Ukraine conflict – both Russia and Ukraine are major wheat suppliers. India is rolling out measures during 2022 to try and take advantage include ensuring that government approved laboratories adequately test the export quality, making additional rail wagons available, and working with port authorities to give priority to wheat exports. India has an advantage of surplus stocks at home and a sharp rise in global prices. So far, the organisation appears to be on track. Indian wheat exports picked up in 2021 to reach 6.12 million tonnes, up from just 1.12 million tonnes the previous year. A 2022 target is believed to be the export of 10 million tonnes of wheat after the new season harvest in June/July.

India’s strategy as concerns preserving its energy credibility includes, along with other Asian nations such as China, the purchase of Russian crude oil at heavily discounted prices from Russian SOE Rosneft, which also operates India’s second largest refinery. India is also keen to fill the vacuum in the merchandise sector after the withdrawal of European companies from the Russian market and is looking to boost trade by an annual US$2 billion per annum. Delhi is negotiating a Free Trade Agreement with the Eurasian Economic Union and this can be expected to progress further once the Ukraine situation is resolved.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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