Among the recent foreign visits of Prime Minister Narendra Modi, the one that grabbed the most headlines was his two-day trip to Russia. It created a different kind of stir in the Western world. The United States and European countries are feeling an unprecedented unease due to the deepening relations between New Delhi and Moscow. They wonder whether India’s purchase of oil from Russia means that Delhi is indirectly funding Moscow for the Ukraine war. It is also being said that Russia will become an even more important partner of India in the defence sector. These countries are worried that such a development will affect their economic and strategic strength.
The deep and long-standing relations between India and Russia are known universally. There was a time when the US and Europe used to side with India’s adversaries at international forums and Soviet Russia used to stand firm as Delhi’s friend. With the disintegration of the Soviet Union and the end of the Cold War, Russia continued to remain a superpower even in a unipolar global scenario. However, India’s trade relations with Russia were largely limited to the purchase of defence equipment.
Scenario changed with the Ukraine war
When Ukraine increased its proximity to NATO under the influence of European countries, Russia reacted violently. Moscow found it a threat to its border security, and a phase of more intense armed conflict started since February 2022. Ukraine is weak in front of the mighty Russia and has suffered heavy losses in this war. The US and Europe did not directly participate in the war but provided Ukraine with all kinds of military and other types of help.
Since a direct war with Russia could have dire consequences, the US imposed many types of sanctions on it to cause economic damage. These included Russia’s exclusion from the international payment system ‘SWIFT’, adverse treatment with countries buying goods from the country, forcible seizure of Moscow’s foreign exchange reserves with the US Federal Reserve System, and many other steps.
Due to the change in global economic conditions after the Ukraine conflict and targeted efforts by India in this direction, Delhi has now started transactions in rupees with more than 20 countries. Thanks to all these changes, the dominance of the US and its dollar has started diminishing. Against the background of all these changes, the close relations between India and Russia played an important role.
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Large quantities of oil purchased from Russia
Due to US and European sanctions, Russia, whose economy was largely dependent on the export of petroleum, reduced the price of its oil significantly to attract countries outside the Western bloc. In such a situation, India increased the purchase of oil from the country to a great extent. It benefitted hugely. Dependent on the rest of the world for nearly 70 per cent of its petroleum crude requirements, India started getting Russian oil at a price almost 40 per cent lower. In the process, it saved billions of dollars. Moreover, since Russia was ready to trade in local currencies, India could save its dollar reserves, as payment for the oil was being made in rupees. With this rupee settlement, international trade got a boost, which was a big relief to India.
The West has to understand that now, time has changed. India has become stronger both economically and strategically. Today, it is self-reliant — to a large extent — for defence goods. It also exports many missiles, guns, and rifles globally. In such a situation, India is competing with established players in defence production. Today, despite America’s threats, it is adopting an independent foreign policy, buying oil in large quantities from Russia, and making payments in rupees. Many more countries are also now slowly dumping the US dollar. Due to the digitalisation of payments, today, India is not afraid of American sanctions like exclusion from SWIFT.
India still imports 45 per cent of its total defence goods and 40 per cent of its oil from Russia. The West’s allegation that India is buying oil from Russia and therefore indirectly funding the Ukraine war is meaningless, if not ridiculous. The reality is that India is paying Russia not in dollars but in rupees, and since Moscow is out of SWIFT, it cannot convert these rupees into dollars. In such a situation, all this money is lying in the Indian accounts of Russian oil companies. Yes, India is definitely benefiting from this because now, Russia is investing the rupee reserve in India, whether it is infrastructure or stock market.
Western countries also have to understand that since India is fulfilling 40 per cent of its requirement by buying oil from Russia and getting it cheap, the demand for oil in the rest of the world is decreasing. That is why European countries are also getting cheaper oil. Therefore, Western countries are also getting indirect benefits from India’s oil imports.
India is a true peacemaker
The PM said in the presence of Russian President Vladimir Putin that this is not the time for war. India has repeatedly said that the war must end. Due to the lack of trust between Ukraine and Russia, very few countries can mediate between the two. If the West really wants to end the war, it should come forward and facilitate peace by entrusting faith in India to mediate. Now the time has come for all the countries of the world to rise above their narrow geopolitical interests and come forward to persuade India to find a lasting solution to this war. Instead of questioning Modi’s visit to Russia and raising doubts, the West should have made use of his visit to bring back peace in the region.
Ashwani Mahajan is a professor at PGDAV College, University of Delhi. He tweets @ashwani_mahajan. Views are personal.
(Edited by Humra Laeeq)
From the state dinner in June last year to the possibility of sanctions, including exclusion from the SWIFT network, a lot of ground seems to have been covered.