By R. Sasankan

Russian President Vladimir Putin came in for a virtual roasting from countries in the west after troops from his country invaded Ukraine on February 24. As far as they are concerned, he is a megalomaniac who has suddenly turned rogue on the global chessboard. India has adopted a fairly nuanced, diplomatic position on the Ukraine issue: it chose not to join the chorus of criticism against Putin, preferring not to express its unequivocal disapproval of the Ukraine invasion. Along with China and the UAE, India abstained from voting on a Security Council resolution moved days after the invasion demanding that Russia withdraw its forces from its neighbour’s territory. It has also failed to support the US-led effort to clamp down with economic sanctions and shun it like an untouchable by severely circumscribing trade relations. India prefers to assert what it characterises as its neutrality on an issue that has become a sort of litmus test to identify friends and foes.

The Ukraine war has forged a loose counter alliance resulting from a growing nexus among China, Iran and Russia. India has tried to steer clear of this grouping too – without being blinded to its self-interest in pursuing lucrative trade deals with them. Russia, in its turn, has been thankful to India for its neutral stand. It is a different matter that India had no other sensible option in a battle between two superpowers. But it is also true that India’s stand has been able to scuttle the move initiated by the US-led west to isolate Putin and Russia.

There has been a veiled criticism of India for its neutral stand on the issue; it has been accused of supporting Putin because it has its eyes on a cheap source of oil and gas, which it desperately needs to feed its galloping energy needs. In one sense, this sort of criticism overstates the facts on the ground. Russia’s share in India’s oil and gas requirement has never exceeded 2 per cent of its requirement. A recent Bloomberg report said Russia had replaced Saudi Arabia as the second largest supplier of crude oil in the month of June, largely because of the $19 per barrel discount it had offered in the previous month. However, this development does not move the needle by very much and experts believe that this blip will not make much of a difference in the immediate future.

The imposition of tough economic sanctions against his country has obviously prompted Putin to treat India as a dependable ally and explore the possibility of signing significant oil and gas deals with it. India, which imports 86 per cent of its crude requirement, will not spurn such an overture.

I tried to buttonhole a few acknowledged oil experts to obtain their views on the latest developments. “I do not see a huge potential for Russian energy exports to India. Such export may rise relative to past levels but, in absolute terms, Russian energy exports to India will remain below 15% of India’s total energy import at the best!, said a renowned energy expert.

But there is one unpredictable factor in assessing the oil and gas market – and that is the ominous presence of Vladimir Putin. Fed up with the caterwaul of criticism and the rash of economic sanctions against Russia, Putin acted swiftly to construct a natural gas pipeline that delivers 10 bcm to China. The gas supply began in 2019 and will eventually increase to 38 bcm a year. Once the Power of Siberia pipeline reaches full capacity, Russia could deliver nearly 60 bcm to China (assuming existing LNG flows to Asia remain).

I do not rule out the possibility of Putin dangling the same bait before India. After all, oil and gas is India’s Achilles heel. Indian companies can be accommodated in Russia’s expanding E&P sector whose fortunes have been buffeted by the spectacular exit of a couple of global oil giants. Indian public sector units have considerable investments in Russia’s upstream sector and have been scouting for more deals.

India has suffered some collateral damage as a result of Western sanctions against several countries even though it wasn’t being explicitly targeted. Iran has been a stable source of crude oil for India for many years. The greatest attraction is its geographical proximity, which reduces the transportation cost. Iran has always offered India two-and-half-months’ credit for crude oil supplies, which makes imports from that country all the more attractive. Sanctions against Iran virtually shut down that source of crude oil. India then turned to Venezuela, a major source of heavy crude which is relatively cheap. Indian companies have been sourcing crude from there in a big way as the domestic refineries are equipped to process heavy crudes. The sanctions against Venezuela dried up that source as well.

Russian crude could not enter the Indian market in significant quantities on account of the distance which makes transportation costs prohibitive. This is the case with Russian LNG too. Russia could have become a major source for LNG. Even if the Putin administration is keen to help India, distance between the two countries is a big deterrent.

Experts believe there is one way out: swap deals.

If there were no sanctions, India could have received Russian LNG from the Far East of Russia under swap arrangements with Japan and South Korea. LNG destined to these two countries from the Middle East could come to India, and LNG acquired by India from the Russian east coast could go to South Korea and Japan. That would be beneficial to everyone involved because of lower shipping costs. It would also provide a ready outlet for Russian LNG. However, with the sanctions in place, such an arrangement is no longer possible. In such a scenario, Russian LNG would have to come directly to India from the Russian East Coast, which would not only be costly but also raise the risk of sanctions against India.

This poses a very difficult situation for India – and it will test its ability to deftly pick its way through minefield of issues even as it strikes a balance between the demand of the two superpowers.