NATO must revisit its unrealistic expectation for New Delhi to cut off ties with Moscow. Local currency oil deals should be the future.
There’s a raging debate over India’s crude purchase from Russia that has invaded Ukraine, thereby pitching Moscow against the combined might of the European Union, UK, the US and other NATO allies. In the last four weeks, a lot has changed in terms of the geopolitical scenario, especially in Eastern Europe and the Baltic region, thereby bringing oil trade into big focus.
India, which pursued a ‘balanced’, ‘independent’ policy, puts her on equidistant terms vis-à-vis the sanctioned Russia and NATO allies in the Ukrainian conflict. India’s position has come under enhanced scrutiny of the world community owing to this unwavering approach.
While overwhelmingly, Indians internationally have hailed a ‘hands off’ policy towards the conflict, humanitarian intervention and ‘Operation Ganga’ have hogged global headlines. In the melee, pro-western lobbies have questioned oil purchases from Russia that may total two per cent of Indian imports.
Veteran parliamentarian Subramanian Swamy stopped short of calling India’s policy is nothing short of being ‘tragic’ and ‘unsustainable’. Hawks apart, India’s call to buy about 33 million barrels of oil from Russia’s top-end exporter Rosneft is pragmatic and rooted in long-term sustainability.
On March 9, an internal note got circulated amongst the top echelons of the Modi government. And, as insiders divulge, on March 11, Prime Minister Modi himself took a call to continue with the oil imports from Russia on Indian terms. Russian President Vladimir Putin, under increasing isolation, seems to have more than accommodated India in the oil and other bilateral trade deals. Offering deep discounts, taking care of insurance costs, safe passage and delivery of crude at Indian ports were some terms that were tempting for India, which was battling high oil import bills.
Payment in rupee terms for oil or settlements against the Russian Ruble at pre-designated rates provides a cushion for Finance Minister Nirmala Sitharaman, whose budget maths would have otherwise gone awry with Brent crude prices touching $114 per barrel on Monday. Also, setting off oil payments against Russian exports, especially the rough diamonds, is not a bad idea in the content and spirit of free trade. Hence, Indian Oil, Bharat Petroleum, Mangalore Refineries & Petroleum Ltd and a host of oil importers jumped into the fray to conclude contracts that would translate into billions of dollars for India.
It’s not just Russia, but the entire middle-east lineup has been tapped to conclude deals that could be showcased how geopolitics and oil trade are inseparable.
With US and UK phasing out hydrocarbon imports from Russia and European Union seeking to fall suit, very handsome deals may still be possible in local currencies to get around the sanctions.
For instance, Iran, which was touted as the biggest oil supplier to India with unflinching ties, was the fall guy to Donald Trump’s sanctions owing to its nuclear programmes. Only two days back, taking a cue from Russian deals, Iran had hinted at resuming rupee-rial designated oil supplies with bilateral trade potential at $30 billion this fiscal. From $17 billion in the pre-sanctioned era of 2019, bilateral trade has plunged to a very modest $2 billion this fiscal.
There’s no denying that both NATO and other western powers recognise India’s compulsions, given its 85 per cent crude requirements are met through imports. While the world is critiquing India’s sustained oil imports from Russia, India is set to increase its share of oil imports from the US by 11 per cent. Moreover, both the EU and the US have not considered India’s oil deals with Russia as violating war-related sanctions. But, western lobbyists and the rumour mill around this ecosystem has been working overtime to put India on defensive mode to justify its continued oil deals with Russia.
India owes no explanation to anyone but herself. Exploring local currency-based oil and other trade deals would encourage a multiplicity of such transactions, lending variety to these transactions away from the referenced US dollar or the Euro.
The four largest oil suppliers like US, UAE, Saudi Arabia and Nigeria should also explore more innovative deals for India that are spoilt with varied options.
Oil deals–both in spot and futures market, concluded by India, cannot be subjected to sanctions that are being used as new neo-nuclear weapons by the Western allies.
India’s economic and political interests globally are diverse, and each response from New Delhi is laced with nuances that cannot be set aside by the world community.
It does not necessarily mean that India should not consider other energy options that limit hydrocarbon dependency. The earlier, it’s that much better.
(The author is director & chief executive at New Delhi based think tank, Centre for Integrated and Holistic Studies)