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]

Russia is India's fifth largest trade partner (after US, China, UAE and Saudi Arabia) jumps from 25th

https://timesofindia.indiatimes.com/business/india-business/russia-...

The large shipments of oil and fertilizer have also meant that India's trade deficit jumped from $20 billion in first half of the current fiscal year to $44 billion in second half.

#Russia is #India's 5th largest trade partner (after #US, #China, #UAE, #SaudiArabia), up from 25th. Huge imports of #oil & #fertilizer caused India's #trade deficit to jump from $20 billion in 1H of current fiscal year to $44 billion in second half. https://timesofindia.indiatimes.com/business/india-business/russia-...

https://twitter.com/haqsmusings/status/1593313844830486528?s=20&...

[Riaz Haq]

'You (#India) Benefit From Our Suffering" #Ukraine Minister Dmytro Kuleba's Message:''The opportunity for India to buy #Russian #oil at a cheap price comes from the fact that Ukrainians are suffering from Russian aggression and dying every day" https://www.ndtv.com/india-news/dmytro-kuleba-to-ndtv-india-can-buy... via @ndtv

New Delhi: Ukraine's Foreign Minister has hit out at India over imports of cheap Russian oil, referring to it as being ''morally inappropriate.'' ''The opportunity for India to buy Russian oil at a cheap price comes from the fact that Ukrainians are suffering from Russian aggression and dying every day,'' said Dmytro Kuleba in an exclusive conversation with NDTV.
''If you benefit because of our suffering, it would be good to see more of your help addressed to us," Mr Kuleba said, responding to Indian Foreign Minister S Jaishankar's statement on Monday that between the months of February and November this year, the European Union (EU) has imported more fossil fuel from Russia than the next 10 countries combined.

''It is not enough to point fingers at the European Union and say, Oh, they are doing the same thing," the Ukrainian Foreign Minister said.


NDTV has reached out to the Foreign Ministry for a response.

According to Mr Kuleba, India's decision to import cheap Russian oil needs to be seen through the prism of human suffering in Ukraine.

The Ukrainian Foreign Minister also said that India, specifically Prime Minister Narendra Modi, has a key role to play in helping to end the war.

''India is a very important player in the global arena and the Prime Minister of India, with his voice, can make a change.'' At the same time, New Delhi, he believes, needs to be direct in referring to the situation in Ukraine.

''We are waiting for the moment when Indian foreign policy will call spade a spade, and name the conflict - not 'war in Ukraine', but what it is, a 'Russian aggression against Ukraine'," he said.

India maintains a close strategic relationship with Russia and has repeatedly abstained in voting against Moscow in United Nations resolutions which condemn the Russian annexation of Ukrainian territory.

Asked if New Delhi's intervention could realistically make a difference in the thinking of Russian President Vladimir Putin, Mr Kuleba said it was important to make a concerted effort.

''If you don't try, nothing can change,'' said Mr Kuleba.

''We have seen some encouraging messages coming from your Prime Minister - when he said this is not the time for war. We hope that (there) is more active, even if it is quiet, behind-the-scenes diplomacy (that) will take place in the coming weeks. It's worth trying (in) any way to end the war," he said.

Russia invaded Ukraine on 24 February 2022 capturing thousands of square kilometres in the East and South of Ukraine, territory that it has since lost to concerted Ukrainian military counter-attacks. Over the last few weeks, Ukraine has been able to re-take the city of Kherson.

He said Kyiv will not halt its military offensive this winter. ''We will not stop for a single day because every pause means more time for the Russians to dig into the ground, to build fortifications and to strengthen their defensive lines in the occupied territories of Ukraine," he said.

Over the last several weeks, Ukraine has come under concerted Russian drone and missile attacks targeting civilian infrastructure, particularly power facilities.

"Our problem is that our electricity grid was built during the Soviet times and, therefore, Russia has all the maps and technical documentation necessary to identify precisely the most critical elements of our energy infrastructure," Mr Kuleba said.

[Riaz Haq]

India's export destinations: Netherlands and Brazil leapfrog ahead

While several countries have reduced their dependence on Russia-refined oil products, India, which has seen a sharp spike in crude imported from Russia, is seen to be processing it and exporting to many countries, especially in Europe.

Netherlands is now India's third-largest export destination. Brazil, India's 20th biggest export destination between April and October 2021, is currently in the eighth position. US & UAE remain on top.

Read more at:
https://economictimes.indiatimes.com/news/economy/foreign-trade/ind...

[Riaz Haq]

Russia and Pakistan might cut unprecedented oil deal, with China as middleman
January 22, 2023 Wajahat S. Khan


https://www.gzeromedia.com/russia-and-pakistan-might-cut-unpreceden...

Cold War rivals Russia and Pakistan are negotiating an agreement for the Russians to start selling cheap oil to energy-starved Pakistan in March.

This will make Islamabad yet another Asian customer of Russian crude at a time when Moscow’s cash inflows are limited by a G7/EU oil cap and sanctions. Also, considering Pakistan is dead broke, payments will be made through a “friendly” country, presumably China – a power play for Beijing, whose yuan will be used for the transactions, giving the currency more sway as an alternative to the US dollar.

How is this deal going to affect American interests in the region? And why is Pakistan, which wants to balance its ties with Washington, giving business to the Russians through China?

First, some history. Although the agreement isn’t finalized, it’ll be geopolitically novel when it is because Pakistan is an unlikely destination for Russian business. Unlike India, Islamabad and Moscow have had no commercial ties for decades.

Considering Pakistan spent the Cold War spying on the USSR and/or attacking its troops in Afghanistan (the Soviet Union paid back in kind by arming India, Pakistan’s archrival), the two sides haven’t exactly behaved like partner-material.

Enter China. Pakistan and China have been “Iron Brothers” for decades. Even though Islamabad was a non-treaty US ally until not too long ago, the Pakistanis and the Chinese have always remained “all-weather friends.”

However, as India settled into the role of becoming America’s strategic partner in the region, displacing Pakistan as the preferred South Asian ally over the last two decades, the Chinese encouraged Pakistan to open up to the Russians, and vice versa. Now, a once hesitant Islamabad doesn’t just want Russian oil, but also natural gas, weapons and more. Still, Islamabad wants to stay aligned with the American camp.

Why is Pakistan doing this? Islamabad’s energy bills make the biggest chunk of its imports. Cheaper oil from Russia will obviously help its escalating balance of payments crisis and ballooning trade deficit.

But the biggest issue is with dwindling foreign exchange reserves. A year ago, Pakistan had $17 billion in the bank. Today, foreign reserves have dwindled to $4.3 billion, which will pay for less than a month of imports.

To manage the dollar crunch, Pakistan could use the Chinese yuan in a swap with China to pay Russia once the oil flows in (it expects to get 35% of its annual crude oil imports from 70 million barrels of Russian crude), putting its import-regime firmly in the China-Russia camp.

Pakistan thus finds itself between a rock and a hard place: It needs the cheap Russian oil but also wants to avoid antagonizing the US and its friends in the Gulf, Pakistan’s main energy suppliers — especially considering that Islamabad has been negotiating bailouts with the Washington-backed IMF and deferred oil payments from the Saudis and the Emiratis.

While the Pakistanis defend their position by citing neighboring India as an example of a country that buys Russian oil even as it tilts towards the US and deals with the Gulf states, Islamabad is in a very different position compared to New Delhi because Pakistan is crawling toward default.

But that’s exactly how Washington and Beijing might find confluence to stop Pakistan from failing. “The US view on this is that countries like Pakistan may at times be strategically important, but in the great power competition between China and US, it doesn’t matter a whole lot,” says Uzair Younus, director of the Pakistan Initiative at the Atlantic Council.

Beyond Pakistan’s limited importance as a partner for counterterrorism in Afghanistan, he assesses that the view from Washington is that if others want to share the burden of propping up Pakistan and stabilizing its economy, so be it.

[Riaz Haq]

#US: #Pakistan can buy #Russian #oil despite restrictions. “So, we have encouraged countries to take advantage of that, even those countries that have not formally signed on to the price cap, so that they can acquire oil in some cases at a steep discount"
https://www.dawn.com/news/1733661

The United States has reiterated that Pakistan can purchase oil from Russia at a discounted price even though it has not signed a Washington-backed price-cap on Russian petroleum products.

US State Department’s spokesperson Ned Price told reporters at a Tuesday afternoon news briefing that Pakistan can also take advantage of the concessions Washington has given to other countries for buying oil from Russia.

“So, we have encouraged countries to take advantage of that, even those countries that have not formally signed on to the price cap, so that they can acquire oil in some cases at a steep discount from what they would otherwise acquire from, in this case, Russia,” Mr Price said.

On December 3, 2022, G7 and EU countries set a price-cap of $60 per barrel on Russian oil to prevent Moscow from using the revenues to finance its war against Ukraine.

Since, Europe and the United States no longer import crude oil from Russia, the controlled purchase would only affect third countries, like Pakistan. Islamabad has not yet signed the accord, mainly because Pakistan does not import oil from Russia.

Mr Price said the US approach to the purchase of oil from Russia has been laid out in the price-cap mechanism that it worked out with other countries around the world, including the G7.

“And the virtue of the price cap is that it allows energy markets to continue to be resourced while depriving Moscow of the revenue it would need to continue to propagate and fuel its brutal war against Ukraine,” the US official said.

“We have made the point that we have very intentionally not sanctioned Russian oil. Instead, it’s now subject to the price cap.” The US, he said, has been very clear that now was not the time to increase economic activity with Russia.

“But we understand the imperative of keeping global energy markets well resourced, well supplied, and the price-cap, we believe, provides a mechanism to do that,” he added.

On Friday, Minister for Economic Affairs Ayaz Sadiq, and Russia’s Energy Minister Nikolay Shulginov said at a joint news conference in Islamabad that they hope to sign an oil deal by late March, enabling Pakistan to buy Russian oil at discounted rates.

A joint statement issued after their talks said that the two sides reached an in-principle agreement on the supply of Russian crude oil and oil products to Pakistan, with technical details to be finalised in March at the latest.

“We have decided that it would be a good idea for Pakistan to approach Gazprom and Novatek, two largest LNG-producing companies, in late 2023 to discuss the conditions” for buying LNG, the Russian minister said.

Energy-starved Pakistan imports approximately 430,000mt of motor gasoline, 200,000mt diesel and 650,000mt crude oil at a cost of $1.3 billion per month.

Market observers earlier this month warned Pakistan may face fuel shortages in the near future as importers struggle to secure dollars to close deals. The country’s foreign exchange reserves have dwindled to their lowest levels in almost nine years.

Buying oil from Russia at a discounted price could ease the pressure.

[Riaz Haq]

#Ukraine wants #US to impose #sanctions against #India for “financing the Russian economy and the Russian military machine". #Russia #oil #economy | Mint

https://www.livemint.com/news/world/ukraine-wants-us-to-impose-sanc...

As the Ukraine-Russia war nears the one year mark, a top official has called for sanctions to be imposed against India. Senior Ukrainian lawmaker Oleksandr Merezhko urged the United States to impose secondary sanctions on China and India if they keep buying Russian energy. The official who heads the foreign affairs committee in Ukraine's parliament, also called for greater ties with Taiwan.

Merezhko said that he had previously lived in New Delhi and found the question of India's oil purchases "painful". But as the war continues with no end in sight, the lawmaker also backed sanctions against buyers contending that such nations were “financing the Russian economy and the Russian military machine".

"They should be consistent. This is a global conflict between democracy - the free world - and authoritarian regimes. There shouldn't be any compromise because of material economic interest," he said.

The western sanctions against Moscow are currently not recognised by India.

Meanwhile, according to a Reuters report citing unnamed sources, Indian refiners have started paying for a significant part of their Russian oil purchases in UAE dirhams. While the purchase of Russian oil does not at present violate any sanctions, banks and financial institutions have become increasingly wary about clearing payments in a manner that will not fall foul of the many measures imposed against the other country.

Indian refiners and traders are concerned they may not be able to continue to settle trades in dollars, especially if the price of Russian crude rises above a cap imposed by the Group of Seven nations and Australia in December. That has led traders to seek alternative methods of payment, which could also aid Russia's efforts to de-dollarise its economy in response to the Western sanctions.

[Riaz Haq]

Why is democratic India helping Russia avoid Western sanctions?


https://www.csmonitor.com/World/Europe/2023/0207/Why-is-democratic-...

Though India does not produce some of the items Russia desperately needs due to Western sanctions, such as microchips, it does make plenty of others.

“Right now the focus is on pharmaceuticals, electronics, machinery, chemical products, medical instruments, and agricultural products,” says Dr. Kapoor. “We have already been exporting these goods to Russia, and there is potential for major increases. ... It may be harder to expand the list due to the threat of secondary sanctions. In this environment, the Indian private sector looks at Russia as a risky market. But the immediate potential is very big.”




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Since Russia’s invasion of Ukraine a year ago, the West has tried to curtail Moscow’s ability to finance the war by restricting its lucrative energy exports.

Over that same time, Asia’s biggest democracy, India, has ramped up its imports of Russian oil by a whopping 33 times.

The future world order may turn on realignments like this.

Much of the Global South – including key countries in Asia, Africa, and Latin America – has declined to join the anti-Moscow sanctions regime, and has instead chosen to maintain active political and commercial relations with Russia. This is part of the reason the Russian economy has so far avoided the intended body blows, but it is also reshaping global trading patterns in ways that might outlast the conflict.

In particular, Russian efforts to evade the restrictions that come with using the U.S. dollar in international transactions may be accelerating the process of dethroning the dollar as the world’s established reserve currency, with vast implications for U.S. financial and political leadership down the road.

India, a fast-growing, secular, English-speaking Asian democracy with an increasingly Westward-leaning popular culture, serves as a prime example as to why the West is not getting buy-in for sanctions – and how the world may realign.

“India is not happy with what Russia did,” says Nandan Unnikrishnan, an expert with the independent, Delhi-based Observer Research Foundation. “But in the longstanding relationship we have with Russia, they have repeatedly proven to be good partners for India. India does not want to lose a friend. As for the moral argument the Americans often cite, well, we don’t accept that. It hardly bears mentioning that we can think of zillions of examples of Western hypocrisy.”

Early in the war, U.S. diplomats made strenuous efforts to convince Delhi to condemn Russian actions in Ukraine, or at least limit its long-standing political and trading relationship with Russia. While privately making clear its disagreement with Russia’s war – a view shared by much of India’s elite – Indian leaders refused to vote against Moscow in the United Nations or to join in any level of the sanctions campaign. Instead it accepted Russian offers of price discounts, which led to a vast increase in India’s imports of Russian oil.

[Riaz Haq]

Why is democratic India helping Russia avoid Western sanctions?


https://www.csmonitor.com/World/Europe/2023/0207/Why-is-democratic-...


Mr. Unnikrishnan says that one way to avoid the long arm of U.S. sanctions – which would hit any attempt to export items with U.S. parts or technology to Russia – is to set up distinct businesses that deal only with the Russian market, as is reportedly already being done in China.

“Some Indian businesses are exploring ways to set up separate production facilities, only for export to Russia. The Indian government is already in the process of certifying Indian generic pharmaceuticals for export to the Russian market,” he says. “There are a lot of ways that joint India-Russia collaboration and trade can be expanded.”

Current Russian policy is to push for abandoning dollar trade in every area, and there has been a lot of talk about creating an alternative currency, perhaps for use among the BRICS trading bloc.

It’s all easier said than done, says Konstantin Sonin, a Russian expatriate professor at the University of Chicago.

“De-dollarization would be very costly to implement,” he says. “People use the U.S. dollar because it’s a more stable, reliable, and liquid currency than any other. There is a premium to be paid for using riskier assets. Nothing Russia can do is likely to dislodge the U.S. dollar from this role. The main threats to the dollar are potential internal instability in the U.S., which might undermine the dollar’s value, or the possibility that some other big country, like China, might develop a viable alternative.”

He says that countries like India are taking advantage of Russia’s current weakness to drive hard bargains, for cheap energy and increased exports to Russia, that benefit their own economies. Russia accepts this because its options have been limited by the global sanctions regime imposed by Western powers.

“This makes sense for Russia only as part of a war-fighting strategy in isolation from the West,” says Dr. Sonin. “Otherwise it’s a costly and inefficient economic strategy for Russia to pursue in the long term.”

Dr. Kapoor argues that there is only one way that the benefits of increased Indo-Russian trade can be permanently locked in.

“The best solution would be for Russia to make an early end to this war,” she says. “We can envisage a situation where Western companies have already exited the Russian market, and burned their bridges, while the Indian private sector no longer regards business with Russia as a risky proposition, carrying the threat of secondary sanctions. All that would go away for us, but we need to see an end to this war.”

[Riaz Haq]

Commerce Secretary Gina Raimondo said Wednesday that the U.S. is considering collaborating with India on certain manufacturing jobs in order to boost competition against China.

https://www.cnbc.com/2023/02/08/us-explores-working-with-india-to-i...

Raimondo told Jim Cramer on CNBC’s “Mad Money” that she will visit India in March with a handful of U.S. CEOs to discuss an alliance between the two nations on manufacturing semiconductor chips. The Commerce Secretary also revisited some of President Joe Biden’s comments on American manufacturing from his State of the Union address on Tuesday.

“We stopped making things,” Raimondo said. “I think, in 1990, there were like 350,000 people working in the chip industry in America. Now it’s like 160,000.”

Biden’s CHIPS and Science Act, signed into law in August, supplied $52 billion for U.S. companies to invest in chip manufacturing. The U.S. semiconductor industry employed more than 277,000 workers in 2021, according to the Semiconductor Industry Association, but it made 0% of the world’s supply of semiconductors as of September 2022.

In comparison, Taiwan and South Korea comprise 80% of the global foundry market for chips. TSMC, the world’s most advanced chipmaker, is also headquartered in Taiwan. But a collaborative effort between the U.S. and the Indo-Pacific “quad” region could lessen the global reliance on Taiwanese semiconductors. In September 2021, India, Japan and Australia announced plans to establish a semiconductor supply chain initiative to secure access to semiconductors and their components.

Raimondo said that India is “making a lot of the right moves.”

“It’s a large population. (A) lot of workers, skilled workers, English speakers, a democratic country rule of law,” she said.

But the Commerce Secretary said the southeast Asian nation must comply with labor standards as part of any deal, especially in light of India’s consumption of Russian oil. The G-7 countries, Australia and the European Union have issued price caps on the cost of Russian oil products to restrict the Kremlin’s access to a potential funding source for its war on Ukraine while still maintaining an oil supply on the global market.

“I’m running the Indo-Pacific economic framework,” Raimondo said. “So we have 13 countries including India. And we’re saying to them, look, sign up at the government-to-government level to labor standards, environmental standards, anti-corruption standards, rule of law standards. And in return, it’ll unlock U.S. business, U.S. capital jobs in India.”

[Riaz Haq]

U.S. Pursues India as a Supply-Chain Alternative to China

https://www.wsj.com/articles/u-s-pursues-india-as-a-supply-chain-al...

Biden administration turns to New Delhi as it seeks to steer critical technologies away from Beijing


The Biden administration is turning to India for help as the U.S. works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilize global security.

Administration officials hosted meetings this week with a delegation of Indian officials and U.S. industry executives, seeking to facilitate technology development and investment in India as part of a broader U.S. push to cultivate alternatives to China.

Challenges arising from Beijing’s expanding global influence have had “a profound impact on the thinking in Delhi just as they have had on the profound impact on the thinking in other capitals,” White House national security adviser Jake Sullivan told reporters on Tuesday. “There is an element of that that forms a backdrop for the discussions here.”

The meetings come on the heels of an agreement with Japan and the Netherlands to start restricting exports of advanced chip-manufacturing equipment to China, joining efforts by the Biden administration to slow China’s military development by cutting access to advanced technologies.

U.S. officials hope those export restrictions create opportunities in India and elsewhere. While India isn’t among the world’s top producers of semiconductors, New Delhi has sought to assert itself as a greater semiconductor player. India is an appealing partner for industries looking to diversify their supply sources. With a population of 1.4 billion people, the country has a massive source of labor and costs are relatively low.

On Tuesday, the administration hosted a task force organized by the Semiconductor Industry Association, which is working in partnership with the Indian Electronics and Semiconductor Association, to develop a “readiness assessment,” aimed at trying to accelerate cooperation and investments. The meetings were attended by top American executives from a range of industries, including defense giant Lockheed Martin and semiconductor producer Micron, administration officials said.


India’s national security adviser, Ajit Doval, led New Delhi’s delegation this week in meetings with Mr. Sullivan and Commerce Secretary Gina Raimondo and other officials.

The meetings underscore a broader U.S. effort to meet challenges from China through alliances with other countries. The Biden administration has given priority to Washington’s relationship with what is known as the Quad—an alliance between India, Australia, Japan and the U.S. that has focused on countering Beijing.

“President Biden really believes that no successful and enduring effort to address any of the major challenges in the world today…is going to be effective without a close U.S.-India partnership at its heart,” a senior administration official said.