Reuters reported that Russia agreed to supply India with nearly half a million barrels of discounted oil a day for 10 years in a deal that’s worth $13 billion a year at today’s prices and amounts to 0.5% of global supply. It follows Defense Minister Singh’s visit to Moscow where he praised their friendship as “higher than the highest mountain and deeper than the deepest ocean” and precedes Putin’s trip to India next year. This is a historic deal with many implications, the top five most significant of which are as follows:
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1. Reliable Revenue & Accelerated Growth
Russia will receive reliable budgetary revenue while India’s growth will accelerate from the large-scale import of discounted oil, thus enabling the first to better manage sanctions pressure while the second will approach its goal of becoming the world’s third-largest economy at a faster pace. This decade-long arrangement also creates a solid basis for diversifying from their strategic partnership’s hitherto military–centricity, and it’s possible that some of Russia’s forthcoming profits could be reinvested inside of India.
2. Russia’s South Asian Energy Pivot
The abovementioned trend is part of Russia’s South Asia energy pivot, which also includes Afghan and Pakistani dimensions that were elaborated on here in terms of the larger context. The Kremlin plans to preemptively avert potentially disproportionate dependence on China by relying on the South Asian market, with India at its core, as a counterbalance. RT importantly informed their audience that “The new deal reportedly accounts for roughly a half of Rosneft’s seaborne oil exports from Russian ports.”
3. OPEC+ Probably Won’t Mind All That Much
Oilprice.com wrote that the deal “could cause friction among OPEC+ members as Russia encroaches on Gulf producers’ market share in India”, but while Russia is now India’s top oil supplier at around one-third of its needs, that still leaves the other two-thirds for Saudi Arabia and the UAE to fill. Moreover, Russia isn’t their competitor in the ASEAN, European, or Japanese markets, those two Gulf Kingdoms’ leaders have excellent personal ties with Putin, and their bilateral relations with Russia are close too.
4. Trump Isn’t Expected To Sanction India
It was assessed last month that “Trump Can Repair The Damage That Biden Dealt To Indo-US Ties” due to his incoming Indophilic team, hence why he isn’t expected to sanction India for this historic deal. His grand strategic goal is to “un-unite” Russia and China in order to more effectively contain the latter, to which end it serves US interests for Russia to rely more on India as a counterweight to China. If he imposes any oil-related sanctions, it might be on China to reduce Russia’s supply to it, not on India.
5. China’s Basement-Bargain Price Demands Backfired
The basement-bargain prices that China reportedly began to demand after February 2022 in exchange for clinching a deal on the long-negotiated Power of Siberia 2 gas pipeline shocked Russian policymakers since they conformed to hitherto unbelievable Western reports about that country’s exploitative nature. To be sure, relations are at an historic high and bilateral trade has never been better, but this bitter experience led to the Kremlin preferring India over China as Russia’s most strategic energy partner.
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The historic Russian-Indian oil deal is a new milestone in these two’s decades-long strategic partnership. It proves that their relations are enduring and expanding in spite of external pressures. Just as importantly, it also disproves speculates that Russia is leaning towards China at India’s expense in the RIC triangle, which forms the core of BRICS and the SCO. To the contrary, Russia is now very clearly leaning closer towards India, though this isn’t at China’s expense nor will it ever be.
