What might Putin bring back from India?

Vladimir Putin went to India for his first visit since 2021. India is one of Russia’s key political and economic partners, but pressure from Western sanctions is hitting both trade and diplomatic relations. Putin’s visit is intended to revive them.

• The United States is trying to knock India out of Russia’s energy orbit, not least with a view to opening the market for its own coal producers. To punish India for trading with Russia and helping the Kremlin finance its war in Ukraine, Donald Trump has already doubled tariffs on Indian goods from 25% to 50%. Despite threats, Trump has made no equivalent move against China, the main buyer of Russian oil.
• In October, the US imposed sanctions on Rosneft and Lukoil, greatly complicating payments and logistics. Indian companies started to curtail their purchases. According to Kpler, 800,000 barrels per day of sales were at risk. Meanwhile, it sees the discount on Urals crude for India under DES terms remaining at around $6 a barrel, or even increasing.
• India’s top buyer of Russian oil, Reliance Industries, already announced halting such supplies to its refineries to avoid secondary sanctions. Nonetheless, India will actively use various methods to conceal its Russian oil imports, including the use of intermediaries, suppliers unaffected by sanctions and trans-shipments at sea, according to Kpler and other analysts. A reduction in Indian trade is bad news for Russia, given Moscow’s rising military spending and a global fall in oil prices.
• The skewed trade balance with India is another problem for Moscow. Bilateral trade reached $68.7 billion for the financial year that ended in March. That’s five times greater than pre-war levels (just $13 billion in 2022), but just half as much as India’s trade with the United States ($132 billion). That headline figure conceals a significant imbalance: India sold just $4.9 billion to Russia, while importing almost $64 billion. Oil accounts for the vast majority, about $50 billion of India’s purchases.
• It is very difficult to service payments for this volume of trade. Sanctions mean the Kremlin cannot easily repatriate profits from oil sales, since settlements are increasingly carried out in non-convertible rupees. In 2023, Russian companies had billions of rupees stuck in accounts in India. Russia even drew up a list of electronics and other products that it might purchase in exchange. During Putin’s visit, the Russian Central Bank announced the opening of a representative office in India (its first representative office abroad was opened in Beijing in 2017).
• Putin said increasing Russian imports was one of the topics being discussed with Indian PM Narendra Modi. The parties’ ambition is to boost trade to $100 billion by 2030. According to media reports, India is interested in exporting more pharma, agricultural products and textiles. It seeks the removal of barriers preventing the export of goods to Russia and wants long-term fertilizer supplies. It is also keen to accelerate talks on creating a free-trade zone with the Eurasian Economic Union.
• Russia will expand collaboration in nuclear energy (Rosatom’s flagship project in India remains the Kudankulam nuclear plant), and also plans to secure a deal on migration of Indian specialists to address labor shortages in several industries. 

Why the world should care

India is currently one of Russia’s few major partners where both market share and political trust endure. Putin’s visit is important to demonstrate that Russia is not isolated and remains influential in Asia. The Kremlin understands that India is balancing its interests between Washington and Moscow, but even cautious cooperation with New Delhi gives Russia vital room for manoeuvre. The big thing for Russia is not to lose the Indian oil market and find a way to conduct trade in something more useful than rupees — be that rubles, another foreign currency, or goods.