Whalesbook
LNG Deal Faces Sanctions Hurdle
India and Russia are discussing a deal for Russia to resume direct liquefied natural gas (LNG) sales, something not seen since the Ukraine war began. Negotiations could conclude within weeks, but the agreement carries the risk of violating Western sanctions.
These talks occur amid volatile global energy prices, worsened by recent attacks on Iran that have disrupted key shipping lanes. A "verbal agreement" to proceed with the LNG deal was confirmed at a March 19 meeting in Delhi between Russia's Deputy Energy Minister Pavel Sorokin and India's Petroleum and Gas Minister Hardeep Singh Puri.
Ramping Up Crude Oil Imports
Beyond LNG, both countries agreed to increase crude oil sales to India. Imports are expected to potentially double from January levels, reaching at least 40% of India's total oil consumption within about a month. India, a major energy consumer, had previously become a large buyer of discounted Russian crude after the Ukraine invasion, a move that had caused friction with the Trump administration.
India has also told its energy importers to prepare for renewed Russian LNG purchases. The Indian government has proactively approached Washington seeking a potential waiver for these sanctions.
India's Geopolitical Balancing Act
Former Indian ambassador to Moscow, Ajai Malhotra, stated that India's decisions are based on its national interests and its long-standing partnership with Russia. He suggested India should "demand exemptions or accommodations as a normal part of negotiation between strategic partners," referring to its relationship with Washington.
This strategic adjustment follows disruptions from US-Israeli actions against Iran. Attacks targeting ships in the Strait of Hormuz have increased fears of prolonged supply disruptions for India's crude oil and LNG imports, leading to local concerns such as long queues at gas stations and shortages of cooking gas.
Shifting Trade and Economic Ties
Russia is taking advantage of the situation, and any new LNG deal is likely to carry less favorable terms for India compared to its 2012 agreement with Gazprom, as it is now a "seller's market."
Russian entities are also proposing collaboration on power transmission infrastructure in India's remote areas and exploring increased air connectivity.
This deepening economic relationship is marked by 96% of bilateral trade now being conducted in rupees and roubles. These transactions can be processed rapidly, facilitating smoother financial flows between the two nations.