Putin’s Delhi Push: From Oil to a Broader Trade Reset

There is a great deal of anticipation around President Vladimir Putin’s visit to India in December. He will be here for the 23rd India-Russia annual summit and this will be the first time since 2021 that he will physically visit the country.

The Soviet Union/Russia and India have enjoyed steady and good relations since the 1950s arising from a degree of geopolitical congruence between the two. In recent times, the two have drawn somewhat apart – with Russia moving towards better ties with China and India reaching out to the United States. Nevertheless, and the recent Indian-Russian interaction testify to this, both are keen to maintain good and even warm ties with each other. In the years before the Ukraine war, India’s imports of Russian weapons were declining and its civil trade anaemic.

Since 2022, seeing opportunity in buying at discounted prices, India increased its oil imports from Russia multi-fold, which saw bilateral trade rise to $68 billion in 2024. Indian purchases were within the price-cap established by the Western countries and were seen by them as serving the useful function of keeping global oil prices low.

The European blockade of Russia has finally begun to push it to develop its relations with the Global South and India is seen as a bridge here. Russia has begun putting money to complete the International North South Transport Corridor and is already using the eastern arm of the corridor to promote trade with Central Asia.

In a recent interaction with the Valdai Club in Sochi, Putin spoke about his upcoming visit to New Delhi and said he had ordered his government to devise measures to deal with the heavy trade imbalance that favours Russia because of India’s oil purchases.

Not surprisingly, he spoke warmly of the India-Russia relationship which he said has been problem free because the two sides kept the sensitivities in check. This is indeed true. India did not join the global condemnation of the erstwhile Soviet Union’s invasions of Hungary (1956), Czechoslovakia (1968), Afghanistan (1979) and Russia’s invasion of Ukraine (2022). In turn, the Soviet Union and now Russia has largely tailed India in South Asia and, in the case of the 1971 Bangladesh War, it provided New Delhi with important geopolitical cover to take an action that angered the United States.

Among the issues Putin discussed was that of the US pressure on India to forgo Russian oil purchases. In his view, India would suffer losses of some $ 9-10 billion (presumably on account of the discounted prices). But if India did refuse, and US sanctions were imposed, it would suffer similar losses. “So why refuse if it also carries domestic political costs?” In his presumption these would come by way of Indian people refusing to accept the humiliation of following the US diktat. In any case, he declared “I know Prime Minister Modi, he will also not make any such decision.” Actually, it is not the domestic cost that would concern India, but the international one which would dent its “strategic autonomy.”

Of course, Putin does seem to be sensitive to the issue of the trade imbalance that had arisen because of massive Indian oil purchases. Russia is now proposing to buy more agricultural products and medicines from India.

But these are things which cannot be done overnight. In any case, India’s history with the Soviet Union and Russia point to the difficulties in promoting trade other than weapons and now oil. India and Russia do not have an FTA, and the two countries have just recently begun negotiating one between India and the Russia-led Eurasian Union

India’s non-military trade relations with the Soviet Union (1947–1991) and post-Soviet Russia (1991–present) have historically been shaped by their geopolitical alliance, but they have consistently faced structural, financial and logistical hurdles. During the Soviet era, trade was dominated by a bilateral barter system emphasising industrial assistance, while post-1991 relations shifted toward market-driven exchanges, exacerbated by global sanctions and energy dependencies.

Trade volumes grew significantly, with the Soviet Union providing technology transfers and aid in sectors like steel, railways, mining, and petrochemicals, but the relationship was plagued by imbalances in the rupee-rouble barter mechanism and dependency issues. The barter arrangement, designed to bypass Western currencies amid Cold War tensions, relied on fixed rupee-rouble exchange rates that often overvalued the rouble. This forced India to export disproportionately more goods (e.g., tea, tobacco, textiles, and spices). India’s debt to the USSR was around $30 billion at the time it collapsed. The rouble devaluation would have shrunk this debt, but New Delhi chose to pay the original amount, though India was itself in an economic crisis.

Post Soviet civil trade was in hard currency and was insignificant. Even so, after the establishment of a stable relationship following Putin’s 2000 visit to India, Indian companies invested in Russia’s oil, gas and pharma sector, while there were some Russian investments in India’s energy and manufacturing sectors. But trade remained weak, averaging just about $8-12 billion.

But since 2022, trade has surged to nearly $ 70 billion on account of discounted oil, with non-hydrocarbon trade being just about $15 billion or so. This is what has persuaded Putin to issue directives to boost imports from India to rebalance trade, but clearly there are structural issues.

A major problem arises from western sanctions which have cut SWIFT links forcing India and Russia to use mechanisms like the rupee-rouble settlements, or third party banks. In 2022, the rupee-rouble trade was revived but the process has not been trouble free.

There are also issues with tariff and non-tariff barriers and import bans on some agricultural and consumer goods. Hopefully, the FTA being negotiated with the Eurasian Union will fix these issues.

Logistics and connectivity remain a problem and the two have to use third-country ports for transhipments. The International North South Transportation Corridor (INSTC) was instituted in 2000 to address this issue, but under-investment has prevented it from becoming an efficient channel for trade. But now faced with European sanctions, the Russians are seriously investing in completing and upgrading this corridor which travels through Iran to Bandar Abbas. Related to this is Chah Bahar through which the Russians are interested in trading as well. Of course, American sanctions on Iran create their own set of problems for Indian companies seeking both these corridors.

Another connectivity project that has great potential is the Chennai-Vladivostok Maritime Corridor (CVMC), also known as the Eastern Maritime Corridor (EMC). The project is designed to enhance maritime connectivity and bilateral trade between India and Russia. It has been mooted since the 1960s but gained momentum amid global disruptions, such as the Red Sea attacks in 2023–2024, which highlighted the need for diversified trade paths. The corridor was officially signed in 2019 and became operational in 2024.

Military trade

Military trade is a major subset of India’s ties with Russia, a subject that needs to be discussed separately. India’s military trade with the Soviet Union (1947–1991) and Russia (1991–present) has been a cornerstone of their strategic partnership, with the USSR/Russia supplying over 80% of India’s defence imports in the 1970s. This figure came down to around 70% in the 2000s, and was 36 % in 2023, driven by Indian diversification to the US, France and Israel. Russia’s China ties, and India’s relations with Russia have generated geopolitical pressure on India to forgo Russian oil and its weapons. The US has in its lawbooks the Countering America’s Adversaries Through Sanctions Act ( CAATSA) of 2017, for which India currently enjoys a waiver. But the future looks turbulent. The performance of Russian equipment, especially the S-400 and the jointly developed Brahmos during the recent military operations with Pakistan is likely to persuade New Delhi to continue its military ties with Russia which also includes assistance in the country’s nuclear propelled submarine projects.

And so...

Strategic ties between India and Russia certainly provide a stable foundation for adding a significant economic component to India-Russia ties. But the two sides need to work to establish an FTA, work out payment innovations and also infrastructure investments so as to reach the $ 100 billion trade target set for 2030. In the recent period, the geopolitical relevance and importance of strategic ties with Russia has been underscored by the difficulties India has been having in its American relationship.

Manoj Joshi is a Distinguished Fellow, Observer Research Foundation, New Delhi.

This piece was first published on The India Cable – a premium newsletter from The Wire – and has been updated and republished here. To subscribe to The India Cable, click here.

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