Explained | What is the status of India’s oil, defence purchases from Russia?

How is India circumventing the sanctions route to ensure supplies are not stopped? What is in the pipeline? 

April 03, 2022 01:01 am | Updated 01:01 am IST

Friend in deed: External Affairs S. Jaishankar and his Russian counterpart Sergei Lavrov in New Delhi on April 1.

Friend in deed: External Affairs S. Jaishankar and his Russian counterpart Sergei Lavrov in New Delhi on April 1. | Photo Credit: AP

The story so far: The last two weeks saw a flurry of visits by senior officials from the West to convince India not to undermine sanctions on Russia by opting for payments in national currencies as also not to increase purchase of discounted oil from Russia. On Friday, Russian Foreign Minister Sergey Lavrov was in New Delhi, the first high-level visit since the start of the Russian offensive in Ukraine.

What is the status of oil purchases from Russia?

“We have started buying Russian oil and have bought at least three to four days of supply,” Finance Minister Nirmala Sitharaman said on Friday. Mr. Lavrov reiterated that Russia is moving ahead with the use of national currencies in lieu of dollar payments with both India and China and these efforts would be “intensified”.

“I have no doubt that a way would be found to bypass the artificial impediments which illegal unilateral sanctions by the West create. This relates also to the area of military and technical cooperation. We have no doubt that the solution would be found and respective ministries are working,” Mr. Lavrov said, addressing a press conference after bilateral talks with his Indian counterpart S. Jaishankar.

The developments came a day after the U.S. Deputy National Security Adviser for International Economics Daleep Singh warned of “consequences” to countries that actively attempt to circumvent or backfill the sanctions.

In sharp comments on Thursday during a conversation with visiting U.K. Foreign Secretary Liz Truss, Mr. Jaishankar termed it a “campaign” against India for buying Russian oil at discounted prices while European countries remain the biggest buyers of oil and gas from Russia despite their announcements to scale it down.

Worldview with Suhasini Haidar | Why won’t India budge on Russia?

India and Russia have been working on streamlining payments through the rupee-rouble mechanism circumventing the SWIFT system and the dollar route. Towards this, earlier in the week, a team from Russia’s central bank met officials from the Reserve Bank of India to iron out issues and identify banks that have no exposure to the Western sanctions through which payments can be made. Mr. Jaishankar informed Parliament recently that a special inter-ministerial group led by the Finance Ministry has been tasked with resolving payment issues for trade with Russia.

According to Reuters, India bought at least 13 million barrels of Russian oil since the Ukraine war began on February 24, a steep rise from last year, when India bought 16 million barrels of Russian oil in all of 2021.

What about defence deals?

The Defence Ministry and the Services have carried out assessments and are closely monitoring the impact the sanctions can have on timely deliveries and supplies from Russia as several major deals are also underway. Officials have stated that while some shipping delays were possible, there would not be any dent in the Army’s operational preparedness along the borders especially the Line of Actual Control.

In addition, the armed forces have also made significant emergency procurements in the last two years since the standoff in eastern Ladakh and have stocked up on spares and ammunition. So, there shouldn't be any immediate urgency for spares and other requirements, officials noted.

For the two countries, payment by a rupee-rouble arrangement is not new. For instance, for the $5.43 billion deal for S-400 air defence systems signed in October 2018, with the looming threat of U.S. sanctions under CAATSA (Countering America’s Adversaries Through Sanctions Act), the two sides had worked out payments through the rupee-rouble exchange. In fact, the delivery schedule got slightly delayed as the payment details were being worked out. Last December, India began taking deliveries and the first unit has been deployed on the western border. The second unit is scheduled to arrive shortly, officials stated.

In addition, several new deals are in the pipeline including 12 Su-30MKI aircraft and 21 MiG-29 fighter jets for the Indian Air Force. However, the Defence Ministry is carrying out a review of all direct import deals and some of them including those from Russia are expected to be dropped as part of the push towards domestic manufacturing.

Also read | Jaishankar sees ‘campaign’ against India for buying Russian oil

According to a recent report from Stockholm International Peace Research Institute (SIPRI), India’s defence imports reduced by 21% between 2012-16 and 2017-21 and while Russia continues to remain the largest arms supplier, the percentage has dropped. “Russia was the largest supplier of major arms to India in both 2012-16 and 2017-21, but India's imports of Russian arms dropped by 47% between the two periods as several large programmes for Russian arms wound down,” the report said.

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