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Why India is interested in Russia
India is becoming a geo-economic player crucial in the reshaping of energy markets after The beginning of the war in Ukraine and a key factor in the relative resilience of Russian production despite the partial disruption of sales to the West.
The needs of the two historical partners are interconnected: on the one hand, India needs to fuel its economic growth with available and possibly cheap energy; on the other hand Russian Federation needs alternatives to Europe and must turn to Asia to fully develop its vast Siberian resources.
India had received the first direct delivery of liquefied natural gas from the new Yamal terminal in October 2021, with a shipment made via FSRU (Floating Storage Regasification Unit) from the terminal in western Siberia to the Dabhol terminal in Maharashtra, via the Arctic and Pacific route.
Three years earlier, GLN's first freighter delivery took place to seal a long-term 2.85 MMTPA contract between Gazprom and GAIL India. Back in 2018, India was already the top destination with 19% of Gazprom's LNG exports.
The upward cycle of commodity prices, particularly the shortage of coal, the country's main energy source, due to China's recovery, has placed India in the need to find reliable, cleaner but affordable alternatives.
India already has long-term contracts with major global liquefied gas producers, Qatar, Australia and the United States. Short-term contracts have also been concluded with Nigeria and Angola to meet the most urgent needs.
With the Yamal LNG project in Russia, the main distributors in the Indian gas network, Petronet and GAIL will have a reliable and continuous source with long-term fixed-value contracts, as in the case of Qatar, that guarantee price and supply stability.
Wars on the seas and pirates
Since liquefied natural gas is transported by ship, is particularly affected by political instability in the seas it has to cross, and the route between Russia and India is plagued by strong areas of tension.
While the western route from the Black Sea is impractical because of the war in Ukraine and also faces piracy in the Gulf of Aden, the eastern route is also made unstable by tensions in Taiwan, geopolitical disputes in the South China Sea, and latent piracy around the Indonesian archipelago.
For this reason, as early as March 2021, following a bilateral meeting, the Indian Energy Center was established in Moscow in order to coordinate logistics and security of shipments with Russian counterparts. The common goal of the two countries is to seek alternatives via the Arctic and Asian route to the expensive traditional routes via Europe that pass through the Mediterranean.
This is where Russia's vast "Northern Seas Route" project., the opening of the Arctic passage between the port of Murmansk and Kamčatka enabled by ice retreat, on which Russia has devoted civilian and military resources over the years, in terms of transportation infrastructure, icebreaker ships and the installation of military bases to control the area.
Geographically, this route would be the fastest route linking Europe and Asia, and in talks between Indian Prime Minister Narendra Modi and Russian President Vladimir Putin, the tenant of New Delhi repeatedly stressed support for Russia in developing this project as an international shipping route.
Why Russia is interested in India
"Indian workers are participating in major gas projects in the Amur region, from Yamal to Vladivostok to Chennai. We envision an energy and trade bridge. I am pleased that the Chennai-Vladivostok maritime corridor is making progress. This connectivity project, together with the North-South International Corridor, will physically bring India and Russia closer together."
The Indo-Russian relationship is not limited to supplies but is throughout the supply chain: many Indian companies have invested in the Russian mining industry, buying stakes in companies or major projects such as the Vankor, Sakhalin-1 and Tass-Yurayakh at a countervalue of about $15 billion.
Major Indian players such as ONGC and Petronet LNG are interested in Arctic resource development and are negotiating to acquire shares in the "Arktik LNG-2" mega-project.
Investment in these projects is particularly costly due to climatic conditions and the technical difficulties of extracting gas there, which in fact necessitated partnerships with Western gas giants, already affected by sanctions due to occupation of Crimea in 2014 and now permanently suspended due to the war in Ukraine.
The intervention of Indian companies in the Russian GLN is even more crucial to ensure the continuity of the projects, and in fact the Russian government has guaranteed massive tax rebates to investors.
In the global natural gas picture, until the war, Russia presented itself as a stable supplier and reliable, now Western pressure to cut Russian gas purchases is offset by below-cost supplies relative to the international benchmark and a customary relationship.
Moscow sees New Delhi as one of the markets par excellence where it can sell its reserves of some 26.5 trillion cubic meters of gas, mainly located in the Yamal Peninsula.
For Russia, India is a key strategic partner at this moment in history, to counterbalance the increasingly "junior partner" relationship with the People's Republic of China.
The development of the relationship with India, of which Russia is the leading supplier of armaments, cemented since the Cold War, allows Russia's largely nationalized commodity producers to open up the most promising market of the decade.
Politically, it allows the Russians to interrelate with a country with which there is no overlap of their respective areas of influence and, prospectively, together with Iran, could consolidate a Russian-Indo-Iranian triangle, equidistant from both Western and Chinese influences.
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