India – Russia Energy Ties

Context:

Due to the sanctions imposed by the west, many companies are ending their partnership with Russian oil and gas firms.
Sakhalin-1 and Sakhalin-2 major energy consortium consisting of major companies such as Shell and Mitsubishi are terminating from the project.

The Far Eastern region which is prone to earthquakes needs special technical expertise and engineering skills.
Even the economic input for exploration of minerals in the region is also huge.
Oil and gas sector is vital for the Russian Economy, specially after the Ukrainian crisis.
Therefore, Russia requires long term partner in the oil and gas sector in the Far Eastern region.
The alternative market for Russia would be in the South Asia, South East and the Eastern Asia.

The bilateral energy trade between the two nations remains significantly low considering its historical ties.
This is despite Russia being the third largest producer and India being the third largest consumer.
The fundamental reason for this is the geographical obstacles for the transportation of oil.
Amidst the conflict in Ukraine, Russia has offered to supply India with cheaper crude oil.
Indian companies though significantly increased their volumes of oil imports from Russia.
India’s total import of Russian oil despite buying additional volumes in March 2022, remained less than 1 per cent of its total oil import.
These figures increased to 18 per cent in May, 2022 as per a report published by CREA.

An increase in energy spending in the Russian Far East would boost naval ties between India and Russia and the Indian presence in the Indo-Pacific.
Shipments of Indian oil from the Russian Far East would also be free of the threat of piracy that still exists close to the Horn of Africa.
One could contend that China would, in a worst-case situation, ban imports of Indian oil from the Russian Far East.
However, considering the geopolitical alliance between China and Russia, the claim that China would find it challenging to halt Russian oil shipments to India is a convincing counterargument.
Even so, India might wield a similar leverage against China if the need ever arises by interfering with its oil supplies across the Malacca Strait.

Source The Hindu