India and Russia in talks to resume LNG sales amid West Asia crisis

In January, New Delhi made what many saw as a quiet but significant diplomatic concession, sharply cutting purchases of Russian crude oil as part of broader negotiations to soften punishing US tariffs on Indian exports. Two months on, things have changed.

According to Reuters, India and Russia have reached a verbal agreement to begin negotiating the direct resumption of Russian liquefied natural gas (LNG) sales to India, the first time such a deal would be on the table since the Ukraine war began. 

The understanding was reached on March 19, when Russian Deputy Energy Minister Pavel Sorokin met Petroleum and Gas Minister Hardeep Singh Puri in New Delhi. If pursued – and it carries the real risk of inviting US sanctions – the deal could be concluded within weeks, Reuters reported citing two people familiar with the discussions.

The two sides also agreed to scale up crude oil sales, potentially doubling them from January’s reduced levels to at least 40 per cent of India’s total imports within a month.

The Hormuz factor

The pivot back to Moscow has been accelerated by a crisis not of India’s making. The US-Israeli attack on Iran on February 28 and Tehran’s retaliatory strikes on shipping in the Strait of Hormuz, through which roughly half of India’s crude and LNG imports pass, have sent prices soaring. 

Petrol queues have appeared outside some fuel stations, while restaurants in parts of the country are running out of LPG.

A Cabinet Secretariat briefing from March 20, seen by Reuters, was candid about the problem India is in. “India had reduced purchases of discounted Russian crude, which would have buffered the situation to an extent,” the note said, warning that a prolonged West Asia disruption could drive up inflation, weaken the rupee and push foreign debt higher. 

The cost of the U-turn

Russian energy, routed to Asian buyers overland or through Arctic passages, bypasses the Gulf entirely, which is a logistical advantage that has become strategically significant. India’s state-owned refiners had already begun placing fresh orders for Russian crude in the hours before Washington announced, on March 5, a temporary sanctions waiver allowing some purchases, Reuters reported. As prices kept climbing, the US further eased its restrictions.

Delhi cut Russian oil imports to please the US, then found itself scrambling to buy them back, this time at less favourable terms. “It is now a seller’s market,” one of Reuters

‘ sources noted, referring to the proposed LNG agreement. India has also approached the US for a sanctions waiver to cover Russian LNG purchases, according to two people familiar with the request.

“India chose the course that best served its national interests, anchored in a long-standing and trusted partnership with Russia,” former Indian Ambassador to Moscow Ajai Malhotra said, adding that New Delhi should now “demand exemptions or accommodations as a normal part of negotiation between strategic partners.”

Beyond oil

Russian state power grid company Rosseti has proposed collaborating with Indian counterparts on transmission infrastructure in remote and mountainous regions, which would mark Moscow’s first entry into India’s power transmission sector. Expanded air connectivity is also being discussed. 

And in trade more broadly, Foreign Minister Sergei Lavrov noted this week that 96 per cent of bilateral commerce is now settled in rupees and roubles, a deliberate insulation against dollar-denominated financial pressure.