Friday, January 28, 2022

New Frontiers In India-Russia Energy Cooperation

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The saga of Indo-Russia relations is one of deep friendship and cooperation across a wide gamut of areas. Both nations have decided to further strengthen and add a new feather to their energy cooperation, just ahead of Prime Minister Narendra Modi’s visit to Russia to attend the Eastern Economic Forum meeting and the India-Russia Annual Summit at Vladivostok. The platform for the Modi-Vladimir Putin summit meet has been set by the successful visit of India’s Minister for Petroleum and Natural Gas Mr. Dharmendra Pradhan to Russia last week. India-Russia conventional and nuclear energy cooperation dates back to the Cold War era and both nations decided to give this historical cooperation a new trajectory.

One phrase which aptly sums up the current energy policies of India and Russia is “broad-basing”- as both countries are exploring options to widen market networks and diffuse risks. India is primarily interested in reducing dependencies and concomitant vulnerabilities associated with meeting its energy requirements from the unstable Gulf region. Russia, faced with repeated threats of sanctions and disruptions post ‘shale gas’ revolution, has pursued a policy of ‘multi-polarity’ which involves looking towards Asia for alternative energy markets. Thus, mutual interdependence set the stage to further ramp up and synergise energy ties during the visit of Mr. Pradhan to Russia

The Indian Minister for Petroleum & Natural Gas led a high level delegation of senior Government officials and industry representatives and held a series of meetings with Russian Government officials and private sector representatives. Meetings with Russian Deputy Prime Minister Yury Trutnev and the Energy Minister Alexander Novak resulted in a comprehensive review of the hydrocarbon sector cooperation and set the tone for sourcing oil and gas as also metallurgical coal especially from far eastern region of Russia and boost mutual energy sector investments.

There were major significant outcomes of the Moscow visit of the Indian Minister. India set out its expectations that Russia- a member of the OPEC (Organization of petroleum exporting countries) plus- should play a proactive role in guaranteeing the supply of crude and arresting the price fluctuations and volatilities. The state of flux over the past few years has resulted in a mutually hurting stalemate for both producer and consumer countries. It would not be out of context to note that India sources more than four-fifths of its crude oil from the OPEC cartel and production cuts coupled with the geo-political instabilities hit India’s economy hard.

Both the Indian and Russian energy ministers laid the foundation for a comprehensive energy co-operation agreement to be signed during the Modi-Putin summit meet at Vladivostok. Energy corridors shall link Russia’s energy rich far eastern regions with India. A related outcome is to further scale up mutual investments in energy sector projects. Russia is India’s largest oil and gas investment destination. Indian public sector oil and gas consortiums involving companies like ONGC and IOCL have heavily invested in Russian energy firms and in projects at Shakhalin, Vancor and Taas Yuryakh.

From the Russian perspective, this also balances out China’s expanding energy investment footprint in regions like Siberia. India’s leading state owned gas company GAIL India renegotiated a long term LNG contract with the Russian Gazprom group in 2018. It is noteworthy that Russian companies like Rosneft have huge equity investments in companies like Essar Oil now rechristened as Nayara Energy. India also offered Russian firms like Novatek with opportunities to invest in its City Gas Distribution and LNG projects and participate in various exploration, production and refining activities.

The visit of Mr. Pradhan, immediately preceding the summit level meeting, outlines the salience that both nations attach to energy cooperation. The 20th annual summit meeting at Vladivostok is poised to mark a paradigm shift in the bilateral energy diplomacy and promises to have far reaching consequences insofar as the global energy landscape is concerned.

Script: Satyajit Mohanty, IRS, Senior Economic Analyst

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