India and Russia Strengthen Energy Ties Amid U.S. Sanctions

In March 2023, India and Russia agreed to enhance their energy collaboration, with plans for Russia to resume direct sales of liquefied natural gas (LNG) for the first time since the onset of the Ukraine war. This agreement was reached during a meeting between Russian Deputy Energy Minister Pavel Sorokin and Indian Petroleum and Gas Minister Hardeep Singh Puri in New Delhi. If finalized, this deal could significantly increase India's imports of Russian crude oil, potentially doubling from January's levels to account for at least 40% of India's total oil imports within a month.

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India's pivot towards Russian energy comes after a period of reduced purchases, which were seen as a concession to the U.S. following the imposition of tariffs by former President Donald Trump. In 2022, India purchased nearly $44 billion worth of Russian crude, benefiting from discounted prices amid the geopolitical crisis.

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The backdrop to this renewed cooperation is the escalating tensions following the U.S. and Israeli attacks on Iran on February 28, 2023. Iran's retaliation, which included targeting vessels in the Strait of Hormuz, disrupted crucial oil supply routes for India. This situation prompted Indian state-owned refiners to increase their orders for Russian crude, especially after the U.S. announced a temporary waiver allowing India to purchase certain sanctioned cargoes.

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Indian policymakers have expressed concerns that the initial reduction in Russian crude imports was a miscalculation, as it left the country vulnerable to rising energy prices and potential economic fallout. A government briefing indicated that prolonged disruptions in oil supplies from the Middle East could lead to higher inflation, a weaker currency, and increased foreign debt.

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Ajai Malhotra, a former Indian ambassador to Moscow, emphasized that India must prioritize its national interests in its dealings with Russia and the U.S. He suggested that India should seek exemptions or accommodations in negotiations with Washington, reflecting the complexities of its strategic partnerships. Despite courting India as a counterweight to China, U.S. policies have inadvertently pressured India to reassess its energy strategies.

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As India and Russia explore new energy agreements, experts warn that any new LNG accord may come with less favorable terms compared to previous agreements, such as the 20-year supply deal with Gazprom established in 2012. The current market dynamics favor Russia, which is eager to capitalize on India's energy needs.

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Additionally, Russia is looking to expand its influence in other sectors, including power transmission and air connectivity, as evidenced by discussions between Russian executives and Indian counterparts. The shift towards rupee-rouble transactions, which now account for 96% of trade between the two nations, further underscores the deepening ties.

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• “India chose the course that best served its national interests, anchored in a long-standing and trusted partnership with Russia,” — Ajai Malhotra, Former Indian Ambassador to Moscow

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• “The time-tested Russian-Indian friendship serves as an example of how interstate relations should and can be built – based on equality, mutual trust and respect, and consideration of each other's interests,” — Sergei Lavrov, Chief Kremlin Diplomat

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This evolving relationship between India and Russia highlights the complexities of global energy politics and the balancing act that India must perform amid competing international interests.

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