US-Iran Tensions Prompt India to Strengthen Ties with Russia

India and Russia Deepen Energy Cooperation Amid Global Price Surge

Key Developments:

• Russia and India have agreed to prepare for Russia to resume direct sales of liquefied natural gas (LNG) to India, a move that could violate Western sanctions.
• India plans to increase crude oil purchases from Russia, potentially doubling from January's levels to at least 40% of its total imports within a month.
• India has approached Washington for a possible sanctions waiver to facilitate the deal.

Background:

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In January, India reduced its purchases of Russian crude oil as a concession to the United States, which was imposing punitive tariffs on India's exports. However, with the recent escalation of the Ukraine war and the US-Israeli attack on Iran, India has found itself reeling from a surge in energy prices.

Details of the Talks:

A verbal agreement to negotiate an LNG deal was reached during a meeting between Russian Deputy Energy Minister Pavel Sorokin and Indian Petroleum and Gas Minister Hardeep Singh Puri on March 19. The two officials also agreed to increase crude oil sales to India, which could account for up to 40% of its total imports within a month.

Impact:

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The deal could have significant implications for India, which is the world's third-largest oil importer and consumer. India's state-owned refiners have already begun ordering additional purchases of Russian crude, and the country is seeking a possible sanctions waiver from Washington to facilitate the deal.

Economic Implications:

The potential deal could also have significant economic implications for India, including a potential hit to export growth of between 2% and 4%. The country is also facing a surge in energy prices, which could lead to higher inflation, a weaker currency, and rising foreign debt.