Rosneft-Reliance Energy Deal: Boosting the augmented India-Russia Economic Ties
On December 12, in the
biggest bilateral energy deal between the two countries, Russia’s state
oil firm Rosneft has entered into a 10-year agreement to supply nearly 500,000
barrels per day (bpd) of crude to Indian private refiner Reliance. Amounting to
0.5% of global supply and valued at roughly USD 13 billion a year at current
market prices, the deal would see Rosneft deliver 80,000 to 100,000 metric tons
of various Russian crude grades and three cargoes of about 100,000 tons each of
fuel oil, each month.
The deal accounting for roughly
half of Rosneft’s seaborne oil exports, is an upgrade in scale i.e., fivefold
more than the previous one-year
agreement concluded in January 2024, between Rosneft and Reliance[1]. The long-term agreement cements India’s time-tested ties
with Russia amidst heavy Western sanctions, entailing an option to extend the deal for
another 10 years. In tandem to this, EAM Dr. Jaishankar recently underscored
the ‘uniqueness’ India-Russia ties, being close both during the Soviet era and
today where both partners with new rationalizations are attempting to find
convergences. Meanwhile statement of Defense Minister Rajnath Singh during his
meeting with Russian President Putin on December 10, also indicated South
Block’s optimism on ties with Russia. Being bullish on the relationship, he asserted that “Friendship between our countries is higher than the highest mountain
and deeper than the deepest ocean.”
Advancing Economic
Linkages
The new landmark deal, besides consolidating India’s position
as a major player in global energy markets, lends a renewed sense of fillip to
India-Russia ties for the long term and in many ways supplanting the shrinking
defence relationship. Post-Russia-Ukraine war, Indian refiners there have
cashed in on Russia’s crude supply, cheaper than rival grades by at least USD 3
to USD 4 per barrel due to sanctions. Competition among oil producers for a
share of the Indian market has gained traction, with the latter being one of
the fastest-growing energy markets, even as demand from the globe’s top oil
importer- China, slows. India became the largest importer of Russian crude
after the European Union, previously the top buyer, imposed sanctions. In
October 2024 alone, India imported USD 2.16 billion worth of Russian crude,
accounting for 37% of Russia’s total monthly oil exports. Notably, the discounted
Russian oil has also meant significant cost savings for India- amounting to $13
billion over fiscal year (FY) 2023-24, albeit the benefits primarily accrued by
large private refiners like Reliance rather than the broader economy[2].
The strategic nature of the energy deal also supports India’s recent
adjustments in its foreign policy, towards greater multi-alignment. The latter
has received greater attention owing to the ongoing thaw in India-China
relations, Russia’s role in stabilising India-China relations as well as
perceptions of Russia’s growing politico-military advantage vis-à-vis Ukraine
and the West.
There is also a renewed sense of commitment from
both sides to expand economic cooperation, building on fresh momentum generated
by bourgeoning energy trade. During his recent visit to India, Russia’s First
Deputy PM Denis Manturov co-chaired with EAM Dr.
Jaishankar the
25th
Session of the India-Russia
Inter-Governmental Commission on Trade, Economic, Scientific, Technological and
Cultural Cooperation (IRIGC-TEC). Amongst the top agendas of of the 25th session of IRIGC-TEC was expediting the
finalization of Programme of Economic Cooperation 2030, which will serve as an enabling
framework for boosting ties in promising areas and fostering market access from
both sides. While diversifying bilateral relations remains key to achieving the
trade target of USD 100 billion by 2030, there is also a flip side, with
rapidly increasing trade since the start of Russia-Ukraine war. New Delhi’s concerns
over trade huge deficit are likely to aggravate in the coming years as the new big-ticket
deal would only contribute in amplifying the bilateral
trade imbalance.
Thinking Ahead
The deal comes ahead
of not only Putin’s summitry visit
to India but also before the beginning of President-elect Trump’s second term.
While Trump has asserted his intentions and optimism to stop the war as soon as
he takes office, he also has on multiple occasions
touted his relationship with Putin. Overall, and despite the possibility of Trump
sustaining/increasing military support for Ukraine, Delhi anticipates greater
likelihood of a negotiated outcome based on pragmatism and with significant
concessions (political and territorial) to Russia. Increasing signs of Russia’s
rehabilitation as a legitimate and normal power within the international order is
also being factored in. Needless to say, a
transactional Trump administration could find its own set of reasons to
pressure India to increase crude imports from U.S. refiners and through
objections to the just signed deal with Russia.
Entailing a newfound salience India is likely to maintain efforts
towards advancing its partnership with Russia. South Block’s perception of
Russia as one of the key ‘resource powers’ globally, means its significance is likely to sustain even as Moscow
struggles with timely defense deliveries to Delhi, while the sun sets on defense industrial joint ventures. Meanwhile, the people-to-people
and business-to-business linkages are very likely to get expanded, with ongoing
bilateral
consultations for finalizing an agreement over launching visa-free
group tourist exchanges.