Modi's India Busting Western Sanctions, Funding Russia's War On Ukraine

[Riaz Haq]

India, a western ally, is openly buying Russian coal, oil and weapons worth tens of billions of dollars at deep discounts. These actions amount to busting western sanctions and financing President Vladimir Putin's war on Ukraine. Many smaller developing countries, including Bangladesh and Pakistan, are abiding by these sanctions and suffering from the consequences in terms of high prices of fuel and food. Why these double standards? Do these policy contractions serve the broader US interests in the Asia region? 

India's Russian Imports Soaring Since the Start of Ukraine War. Source: Reuters

India's Russian coal imports are up 6-fold from May 27 to June 15, 2022, according to Reuters. Delhi's Russian oil buying has jumped 31-fold in this period.  Bulk shipments of Russian thermal coal to India began in the third week of May, 2022. 

India is defying western sanctions to buy millions of barrels of discounted Russian crude oil, hiding their origin and exporting refined petroleum products with a big markup to make a huge profit. China has yet to increase its oil imports from Russia, according to news reports. Meanwhile, India's neighbors Bangladesh and Pakistan are abiding by western sanctions and paying much higher market prices to buy oil for their domestic needs, and hurting their people. Such double standards are not going unnoticed. 

India's Refined Petroleum Exports.Source: MarketWatch

India is importing large amounts of deeply discounted Russian crude, running its refiners well above capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe, according to MarketWatch.  “As the EU weans from Russian refined products, we have a growing suspicion that India is becoming the de facto refining hub for Europe,” said Michael Tran, global energy strategist at RBC Capital Markets, in a Tuesday note. Here’s how the puzzle pieces fit together, according to Tran:

"India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months". 

Bangladesh and Pakistan are afraid to buy Russian oil for fear of western sanctions while American ally India feels free to do so.  Pakistan's Imran Khan sought to buy Russian oil and gas before he was removed from power in early April. Pakistani Finance Minister Miftah Ismail told CNN's Becky Anderson in a recent interview, “It is very difficult for me to imagine buying Russian oil. At this point I think that it would not be possible for Pakistani banks to open LCs or arrange to buy Russian oil". Similarly, Bangladeshi foreign minister AK Abdul Momen said, “Russia has offered to sell oil and wheat to us, but we can’t do it out of fears of sanctions. We asked [India] how they did it [import oil from Russia]. They [India] said they have found some tricks,” Momen added. 

The West, particularly the United States, is turning a blind eye to India's actions when it comes to busting sanctions on Russia. Indian Prime Minister Narendra Modi is openly funding the war in Ukraine by buying weapons and energy from Russia. At the same time, India's smaller neighbors feel intimidated by the threat of western sanctions if they follow Modi's example. Such double standards are not going unnoticed. 

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[Riaz Haq]

#Europe, #US, #G7 court #India to join efforts to punish #Russia. #Biden views India as too essential a partner to contain #China to seriously consider sanctioning India for increasing its trade with Russia. #ModiInGermany #Modi #Ukraine https://www.nytimes.com/2022/06/27/world/europe/europe-and-the-us-c...


As Ukraine’s allies seek to broaden the coalition of nations against Russia, the United States and Europe are working to persuade India to abandon its neutral stance in the war in Ukraine.

Prime Minister Narendra Modi on Monday will join the Group of 7 summit in Germany, where Ukraine has been the focus. So far, U.S. overtures to persuade Mr. Modi to stop buying Russian oil have failed. Its purchases of Russian crude have doubled since the conflict’s start.

Four other nations with close relations to Russia — Argentina, Indonesia, Senegal and South Africa — were also invited to the summit.

Mr. Modi has maintained a neutral stance on the war, calling for a resolution through diplomacy and dialogue. But India’s increasing trade with Russia has undercut U.S.-led efforts to starve the Kremlin of oil revenue.

Political observers say that the Biden administration probably views India as too essential a partner in its plans to contain China for it to seriously consider sanctioning India for increasing its trade with Russia.

Mr. Modi is scheduled to participate in sessions on climate, energy, health, food security and gender equality. During the summit, President Biden announced plans for an infrastructure fund, with G7 countries putting up billions of dollars for development projects in India and elsewhere as a counterweight to China’s expansive Belt and Road Initiative.

The meeting at Schloss Elmau, a retreat in the Bavarian Alps, comes amid a worsening situation in Ukraine that has not only set off a geopolitical crisis, but also challenged energy and food security, particularly in developing countries.

While the U.S. and Europe are working to reduce their dependence on Russian energy, India and China have drastically increased their purchases, taking advantage of crude discounts of $30 per barrel.

When he was re-elected in 2019, Mr. Modi promised to double the size of India’s economy by 2024. His government said India’s growth depends upon reliable and affordable fuel supplies, and that sanctions on Iranian oil have left India with few other options.

As India increases its purchases of Russian oil, Europe has continued to buy the majority of Russian natural gas exported in recent months. Indian officials have criticized what they characterize as the hypocrisy of the West.

“Punishing India for getting a good deal, and doing it legally, is not on their immediate agenda,” said Samir N. Kapadia of the Vogel Group consultancy in Washington.

“However,” he added, “I don’t believe these record import levels will go unnoticed.”

[Riaz Haq]

Dr. Audrey Truschke
@AudreyTruschke
I understand the diplomatic reasons for saying this. But the unvarnished reality is that India is a weak partner for the US, and it’s becoming weaker by the day. #USIndia
Quote Tweet
Secretary Antony Blinken
@SecBlinken

United States government official
· 10h
Met with India’s @DrSJaishankar at the @G7 Summit to underscore the importance of #USIndia cooperation. As strong partners, we’ll continue working closely to address global economic challenges and strengthen security, prosperity and clean energy in the Indo-Pacific.

https://twitter.com/AudreyTruschke/status/1541804842011738113?s=20&...

[Riaz Haq]

#India’s crude #oil imports from #Russia jumps 50 times; now accounts for 10% of all import. Russia surpassed #SaudiArabia to become India’s second-biggest oil supplier behind Iraq as refiners crowded Russian crude oil that is available at a deep discount https://www.hellenicshippingnews.com/indias-crude-oil-imports-from-...

Russia has now emerged among the top 10 suppliers of crude oil to India. From all the crude oil purchases from overseas, India’s imports from Russia have climbed more than 50 times since April.

With that, Russian oil imports now account for 10% of India’s total crude imports basket. Prior to the Ukraine war, Russian imports were just 0.2% of all the oil imported by India.

An official told reporters, that Russian oil now makes up 10 percent of India’s oil import basket in April. It is now among the top 10 suppliers, as reported by PTI.

Notably, about 40% of Russian oil has been bought by private refiners namely Reliance Industries and Rosneft-backed Nayara Energy.

In May, Indian refiners purchased approximately 25 million barrels of crude oil from Russia.

Also, last month, Russia surpassed Saudi Arabia in becoming India’s second-biggest oil supplier behind Iraq as refiners crowded Russian crude oil that is available at a deep discount in a multi-year high Brent crude and US WTI scenario following the Kremlin’s invasion of Ukraine.

Saudi Arabia is now the third-largest crude oil supplier for India.

India is the third-largest oil consumer in the world with 85% of which is imported, after China and the US.

Due to the conflict with Ukraine, there have been fewer buyers for Russian Ural crude oil as some foreign governments and companies have exited the country’s energy exports which led to a decline in the price.

As per the report, Indian refiners have taken advantage of this and purchased Russian crude oil at discount as high as $30 per barrel.

India has continuously defended its decision for crude oil purchases from Russia even when major western economies issued several sanctions on President Vladimir Putin-led country condemning their invasion of Ukraine.

On May 4, in a press statement, the Ministry of Petroleum & Natural Gas said India’s India’s energy needs are enormous with daily consumption of around 5 million barrels and a refining capacity of 250 MMTPA. For energy security and to fulfill its objective of providing energy justice to each of its citizens, Indian Energy companies buy from all major oil producers in the World. On average, India has the unique distinction of servicing 60 million visitors at its petrol pumps every single day. Despite challenging times, it is important for the Government to ensure access to affordable energy for our citizens.

According to the ministry, India’s top 10 import destinations are mostly from West Asia. In the recent past, the USA has become a major crude oil source for India, supplying almost $13 bn worth of energy imports, with almost 7.3% of the market share of crude oil imports.

The ministry had explained that Indian Energy companies have been sourcing energy supplies from Russia, on a sustained basis, over the past several years. Yearly figures may have varied due to a variety of reasons, including operational necessities. If suddenly, now, as a huge importer of crude oil, India pulls back on its diversified sources, concentrating on the remaining, in an already constrained market, it will lead to further volatility and instability, jacking up international prices.

“Despite attempts to portray it otherwise, energy purchases from Russia remain minuscule in comparison to India’s total consumption,” the ministry had said.
Source: Livemint

[Riaz Haq]

Suhasini Haidar
@suhasinih
How imports of Russian oil have soared: DataPoint
@the_hindu
by
@VigneshJourno

https://twitter.com/suhasinih/status/1542008749287608322?s=20&t...

[Riaz Haq]

#India's Top Cement Maker Paying for #Russian #Coal in #Chinese #Yuan. India tried setting up an #INR payment mechanism for #trade with Russia, but that has not materialized. Chinese businesses have used the yuan in trade settlements with Russia for years https://money.usnews.com/investing/news/articles/2022-06-29/exclusi...

India's biggest cement producer, UltraTech Cement, is importing a cargo of Russian coal and paying using Chinese yuan, according to an Indian customs document reviewed by Reuters, a rare payment method that traders say could become more common.

UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino, the document showed. It cites an invoice dated June 5 that values the cargo at 172,652,900 yuan ($25.81 million).

Two trade sources familiar with the matter said the cargo's sale was arranged by SUEK's Dubai-based unit, adding that other companies have also placed orders for Russian coal using yuan payments.

The increasing use of the yuan to settle payments could help insulate Moscow from the effects of western sanctions imposed on Russia over its invasion of Ukraine and bolster Beijing's push to further internationalise the currency and chip away at the dominance of the U.S. dollar in global trade.

The sources declined to be identified as they are not authorized to speak to the media. UltraTech and SUEK did not respond to a request seeking comment.

"This move is significant. I have never heard any Indian entity paying in yuan for international trade in the last 25 years of my career. This is basically circumventing the USD (U.S. dollar)," a Singapore-based currency trader said.

The sale highlights how India has maintained trade ties with Russia for commodities such as oil and coal despite the western sanctions. India has longstanding political and security ties with Russia and has refrained from condemning the attack in Ukraine, which Russia says is a "special military operation".

It was not immediately clear which bank opened a letter of credit for UltraTech and how the transaction with SUEK was executed. SUEK did not respond to a request seeking comment.

India has explored setting up a rupee payment mechanism for trade with Russia, but that has not materialized. Chinese businesses have used the yuan in trade settlements with Russia for years.

For Indian trade settlements using the yuan, lenders would potentially have to send dollars to branches in China or Hong Kong, or Chinese banks they have tie-ups with, in exchange for yuan to settle the trade, two senior Indian bankers said.

"If the rupee-yuan-rouble route turns out to be favourable, the businesses have every reason and incentive to switch over. This is likely to happen more," said Subash Chandra Garg, a former economic affairs secretary at India's finance ministry.

India's bilateral trade with China, for which companies largely pay in dollars, has flourished even after a deadly military clash between the two in 2020, though New Delhi has increased scrutiny on Chinese investments and imports, and banned some mobile apps over security concerns.

An Indian government official familiar with the matter said the government was aware of payments in yuan.

"The use of the yuan to settle payments for imports from countries other than China was rare until now, and could increase due to sanctions on Russia," the official said.

---
Business units of Russian coal traders in Dubai have become active hubs for facilitating deals with India in the recent weeks, as Singapore has grown wary of provoking western nations that invoked sanctions against Russia, said multiple coal traders based in Russia, Singapore, India and Dubai.

[Riaz Haq]

Sanctions-Ravaged Russia Offers Opportunities for Indian Firms
Putin says Indian retailers in talks to open stores in Russia
India has already been snapping up cheap Russian crude oil

https://www.bloomberg.com/news/articles/2022-06-30/sanctions-ravage...

June 29, 2022 at 8:00 PM PDT


Indian companies are looking to bolster their operations in Russia, eyeing the opening left by the exodus of European, American and Japanese companies after the country’s invasion of Ukraine.

From drugmakers to consumer good firms, a number of Indian companies are either bagging new projects or are gearing up to pitch for more contracts as Moscow seeks fresh partners and vendors to fill the void. Indian retailers are also in talks to open stores in Russia, President Vladimir Putin told a BRICS business forum last week.

[Riaz Haq]

“The Pak-Arab Refinery says it can utilise 15-30 percent Russian crude oil by blending it with the crude oil it imports from the UAE and Saudi Arabia for refining purposes. Byco says Russian crude oil specifications vary from field to field and most of it is acceptable except Ural crude oil, which has a large percentage of sulphur. In short, most of the Russian crude oil is acceptable.”

https://www.thenews.com.pk/print/970302-refineries-views-on-russian...


At present, refineries open LCs in dollars which are confirmed by foreign banks and information about every transaction in dollars goes to the New York bank. So for the import of Russian oil, refineries cannot make any transactions amid sanctions against Russia. However, refineries say in case the government manages to import the Russian crude oil under any transaction mode, then they can use the Russian crude oil for producing mogas, diesel, and other petroleum products. “Can the government, which is ready to reenter the IMF programme, avoid the sanctions? This is the biggest question that refineries have no answer to.”

In the past, Byco imported two Russian crude oil cargoes but at that time there was no Russia-Ukraine war and there were no sanctions on Russia. According to official and industry sources, Russia used to sell its crude oil through trading companies such as Trafigura, Vitol and others. The said fuel trading companies used to store the Russian oil in Fujairah. From there, it was purchased. Now under the new scenario, the situation has entirely changed. In the presence of the US, the UK and EU sanctions, the refineries will have to import the crude oil from Russia not through the trading companies and this is how the insurance and freight charges for importing crude directly from Russian ports will also matter in the landed cost of Russian product.

According to industrial sources, China is the biggest importer of Russian crude oil and then comes India. India has been using the Russian crude oil for many decades. Under the scenario, it is importing the crude either under the Indian Rupee-Ruble transaction arrangement or a barter deal.

China and Russia are trading in their own currencies. The US and other big western economies have protested against India. However, India rejected their plea saying its economy heavily depends upon fuel from Russia. They said that it is India that also managed to get a waiver from the US sanctions on Tehran for importing fuel from Iran. Since the economic muscle of India is very strong as its reserves stand at $650 billion and is a lucrative market for Russia, the US and EU countries cannot afford to annoy India.

However, Pakistan, they said, is aspiring to be in the IMF programme with only $10 billion in reserves and massive unsustainable external loans. They said that in case Pakistan imports Russian oil, it may face the wrath of the US. The US may influence Saudi Arabia to cut oil facilities Pakistan is presently getting. They also suggested that for importing the Russian oil, the government should also take a nod from the IMF.

[Riaz Haq]

India and the United States: Two Countries That Can’t Live With Each Other or Without Each Other


https://www.nytimes.com/2022/07/11/books/review/a-matter-of-trust-m...


A MATTER OF TRUST
India-US Relations From Truman to Trump
By Meenakshi Ahamed

Indian leaders’ admiration for the Soviet Union, their refusal to condemn its invasions of Hungary (1956), Czechoslovakia (1968) and Afghanistan (1979), and its reliance on Soviet arms made for a Cold War relationship between India and the United States that was correct at best and, not infrequently, downright hostile. The low point was undoubtedly 1971, when, in response to the Pakistani Army’s assault on East Pakistan (now Bangladesh) and Chinese and American support for Pakistan, Prime Minister Indira Gandhi signed a friendship treaty with the Soviet Union. As a gesture of support for Pakistan, Richard Nixon dispatched the aircraft carrier Enterprise to the Bay of Bengal. Anti-Americanism in India soared.

Nixon, who loathed Mrs. Gandhi, often referring to her in words unprintable here, backed Pakistan, which had been a steadfast ally during the Cold War and, in 1971, was helping to arrange Henry Kissinger’s secret and transformative trip to Beijing. It didn’t matter that Pakistani troops were committing rape, mass killings and pillage in East Pakistan, forcing three million Bengalis to flee to India. India’s defeat of Pakistan, which culminated in East Pakistan’s independence, confirmed Nixon and Kissinger’s conviction that India had used the occasion to achieve its longstanding goal of truncating Pakistan.

.....A series of able, sympathetic American ambassadors, notably Chester Bowles and John Kenneth Galbraith, adroitly navigated the often turbulent diplomatic waters and became beloved figures in India because of the genuine affection they had for it.

By contrast, Nehru’s reflexively anti-American defense minister, Krishna Menon, seemed to make it his mission to alienate American leaders with his hectoring, arrogance and prickliness. Mrs. Gandhi, aloof, quick to take offense, slow to forgive slights, and thus remarkably similar to Nixon, aggravated his insecurities, and stoked his rage. (Another photograph in Ahamed’s book captures their mutual disdain.) George W. Bush admired India’s democracy and probably did more to forge today’s India-United States strategic partnership than any other president. A particularly significant achievement was the 2008 agreement on civilian nuclear cooperation, which cleared the path for India to purchase American nuclear fuel and technology. Because India had not only steadfastly refused to sign the Nuclear Nonproliferation Treaty but had also become a nuclear-armed state, many barriers had to be overcome to clinch the deal, and Ahamed’s explanation of the intricacies is masterly. So is her explication of Prime Minister Narasimha Rao’s 1991-96 economic reforms, which unshackled India’s regulation-bound economy, boosted growth rates and laid the foundation for increased trade with, and investment from, the United States.

[Riaz Haq]

A MATTER OF TRUST
India-US Relations From Truman to Trump
By Meenakshi Ahamed

https://www.nytimes.com/2022/07/11/books/review/a-matter-of-trust-m...

Barack Obama preserved the gains made under Bush and was a hit with Indians, but he promised more than he was able — or willing — to deliver. Trump left Modi momentarily, and uncharacteristically, speechless by asking him why India regarded China as a threat when, on Trump’s mental map, the two countries didn’t even share a border. Undaunted, Modi played to Trump’s vanity by arranging for one million Indians to welcome him during his February 2020 trip to the prime minister’s home state, Gujarat.

India and the United States are fellow democracies (though democracy has seen better days in both countries of late). But one of the themes in “A Matter of Trust” is that this commonality hasn’t prevented the collision of interests and acrimony created by India’s alignment with the Soviet Union, and later Russia; the American embrace of Pakistan; and India’s determination to become a nuclear power, despite Washington’s dogged opposition.

The divergence of interests continues. In 2018, India, unmoved by American opposition, signed a $5 billion deal to buy Russia’s top-shelf S-400 air defense system. Similarly, India has refused to publicly condemn, let alone impose sanctions on, Russia following its Feb. 24 invasion of Ukraine.

A shared suspicion of China, deepening military and economic ties, and the Indian diaspora’s influence will probably make for increasing comity between the two countries. But each will inevitably fail to meet the other’s expectations. Those wishing to understand the complicated relationship between these two countries will find Ahamed’s perceptive, evenhanded book the best available on the topic, both a pleasure to read and deeply informative.

[Riaz Haq]

INDIA IS A SWING STATE — COOPERATE WITH IT ACCORDINGLY
SHARINEE L. JAGTIANI AND AMEYA PRATAP SINGH

https://warontherocks.com/2022/07/india-is-a-swing-state-cooperate-...

Since the high point of its relationship with the West in the early 2010s, India has underperformed on its economic potential, backslid on democratic values, and remained unwilling to commit to more formal security arrangements. This year, India’s diplomatic response to the Russian invasion of Ukraine further dashed hopes in many Western capitals that New Delhi was moving inexorably toward full membership in the Western security community. But this does not mean the West should give up strengthening its partnership with India. Rather, it provides an opportunity for the West to engage with India on more realistic terms.

India’s non-alignment is not, as some policymakers hoped, simply a relic of the Cold War. Rather, it represents a fundamental and enduring aspect of New Delhi’s worldview. By taking India’s status as a global swing state into account and acknowledging its security preferences, the West can still cooperate with it on a mutually productive footing.


This begins with helping India wean itself away from Russian technology, while recognizing that this will not lead India to abandon its commitment to strategic autonomy. Western states should continue to integrate India into loose security arrangements in the Indo-Pacific. These can help New Delhi offset China’s military superiority and offer Western states greater influence, access, and defense integration in India’s maritime neighborhood. Western partners should also embrace India’s role as a continental power and support its deterrence capabilities on the Sino-Indian border. Maintaining the status quo there is a crucial part of any Western strategy to contain China. Finally, India can help Western economies diversify their manufacturing and supply chains away from China. New Delhi does not want to hurt its economy by sanctioning Russia, but this does not mean it wouldn’t willingly participate in policies that strengthen its economy at China’s expense.