MUMBAI: Ahead of the Russian president’s planned visit to India, Reliance Industries signed a 10-year agreement to buy cut-price crude worth around $13 billion annually from Rosneft, Reuters reported on Thursday, citing three unnamed sources. The largest-ever energy deal between the countries looks like a win-win for sanctions-hit Kremlin and New Delhi’s push to cut its energy bill. But it does little to fix other niggles in the relationship.
Locking in a discount for Russian Urals is good news for the world’s fifth-largest economy. Cheaper power will reduce energy-hungry India’s anxiety about future supplies as the green transition gathers pace. Russian oil accounts for more than one-third of India’s energy imports. Controlling costs is especially important now that the rupee is depreciating under pressure from a surging US dollar. It’s also key to containing inflation and shrinking the current account deficit to preserve India’s appeal for foreign investors.
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The South Asian country has so far defied Western criticism to emerge as the second-largest buyer of Russian oil after China. The deal could shore up India’s oil purchases from the sanctions-hit country. They had been flagging of late – in November imports were 48 per cent lower than a peak of 2.3 million barrels per day in June, per the International Energy Agency’s analysis.
The agreement is also a boost for Reliance, Mukesh Ambani’s $200 billion conglomerate, whose refinery operations are one of the world’s largest and most complex. Injecting in low-cost crude will bolster refining margins.
Yet the deal could compound Moscow’s challenge of managing a deluge of rupees. Russians cannot repatriate the money, but they can invest it in New Delhi’s government bonds and use it to pay for Indian imports. Yet Russia buys little from India, whose trade deficit with the Kremlin stood at $57 billion, in the year ended in March. Non-dollar settlements could turn more fraught after Donald Trump returns to the White House. The US president-elect has threatened members of the BRICS grouping of emerging economies with a 100 per cent tariff should they attempt to replace the greenback with other currencies.
For now, the deal is a breather, but a crude one.
CONTEXT NEWS
Russia’s state oil firm Rosneft has agreed to supply nearly 500,000 barrels per day of crude to India’s Reliance Industries in the biggest-ever energy deal between the two countries, Reuters reported on December 12, citing three sources familiar with the deal.
The 10-year agreement amounts to 0.5 per cent of global supply and is worth roughly $13 billion a year at today’s prices, the report added.