AS India’s diplomats negotiated an accord to ease punitive US tariffs on its exports in January, New Delhi slashed its purchases of Russian crude oil – a move widely seen as a painful concession to President Donald Trump.
Three months later, however, Delhi and Moscow are deepening their energy cooperation, with both sides agreeing to prepare for Russia to resume direct sales of liquefied natural gas (LNG) for the first time since the start of the Ukraine war, according to two people familiar with the matter.
Details of the talks, which come amid skyrocketing energy prices triggered by the US-Israeli attack on Iran, have not been previously reported.
The “verbal agreement” to negotiate an LNG deal was reached during a March 19 meeting between Russian Deputy Energy Minister Pavel Sorokin and Indian Petroleum Minister Hardeep Singh Puri in Delhi, the people said.
The two officials also agreed to further increase crude oil sales to India, which could double from January’s levels to at least 40% of India’s total imports in about a month, three people said.
India became a major buyer of heavily discounted Russian crude after the invasion of Ukraine – a point of contention with the Trump administration.
The world’s third-biggest oil importer purchased nearly US$44bil of crude from Moscow last year, helping to keep the Kremlin’s wartime economy alive.
India has separately told its energy importers to prepare to resume purchases of Russian LNG, one of the people said.
Delhi has already approached Washington about a possible sanctions waiver, according to the source and a second person.
India’s external affairs and petroleum ministries did not respond to questions. Foreign ministry spokesman Randhir Jaiswal recently said Delhi was in talks with several countries to secure energy supplies, including LNG.
The Russian energy ministry declined to comment, while the US Treasury Department did not address questions about sanctions relief.
“India chose the course that best served its national interests, anchored in a long-standing and trusted partnership with Russia,” said Ajai Malhotra, a former Indian ambassador to Moscow.
Delhi should now “demand exemptions or accommodations as a normal part of negotiation between strategic partners,” he added, referring to Washington.
While the United States has courted India for decades as a counterweight to China, the world’s fifth-largest economy has now been left reeling twice in less than a year by decisions initiated largely in Washington.
After years of buying discounted Russian crude, Delhi sharply curtailed purchases after Trump in August imposed tariffs as high as 50% on Indian goods – among the most punitive levied on any country. (The US Supreme Court has since ruled that Trump acted unlawfully.)
India’s calculus quickly changed after the United States and Israel attacked Iran on Feb 28. Teheran’s retaliation included targeting ships in the Strait of Hormuz, effectively shutting the narrow strip through which about half of India’s crude oil and LNG supplies pass.
Long lines have been seen outside some Indian petrol stations, while some restaurants ran out of cooking gas.
Demand for Russian energy exports, which avoid the Gulf when shipped to Asian customers, has sharply increased across the region.
India’s state-owned refiners began ordering additional Russian crude in the hours before the United States on March 5 announced a temporary waiver allowing Delhi to buy some sanctioned cargoes.
As oil prices continued to climb, Washington further loosened restrictions.
Some Indian policymakers have lamented that Delhi cut Russian crude imports as a concession to the United States, according to a government document.
“India had reduced purchases of discounted Russian crude, which would have buffered the situation to an extent,” said the note, a briefing on the Middle East crisis prepared on March 20 for the Cabinet secretariat.
A prolonged disruption of oil flows from the Middle East would prompt a cascade of economic challenges, “leading to higher inflation, a weaker currency and rising foreign debt”, it warned.
Export growth could take a hit of between 2% and 4%, with wholesale inflation rising by 0.3% to 0.7%.
Russia, which has maintained friendly ties with India since the Cold War, is pressing its advantage.
Any new LNG accord would likely contain less favourable terms than the 20-year supply deal India’s state-owned GAIL agreed with Russia’s Gazprom in 2012, according to one source.
“It is now a seller’s market,” the person said.
Executives at Russian state power grid company Rosseti, who were in Delhi last month, also proposed working with Indian counterparts on transmission facilities in mountainous and remote areas.
If an agreement is reached, it would mark Moscow’s first foray into India’s power transmission sector.
Russia is also keen to expand air connectivity: an executive with St Petersburg’s Pulkovo Airport said he has been exploring the possibility of more direct flights.
Chief Kremlin diplomat Sergei Lavrov recently told a conference that 96% of trade between the two countries is now conducted in rupees and roubles.
“The time-tested Russian-Indian friendship serves as an example of how interstate relations should be built,” he said.
Rupee-rouble transactions of up to US$1bil can now be processed in as little as a day – more than twice as fast as just a few years ago, a top executive at the Indian branch of Russian lender Sberbank said last month. — Reuters
