Petro Rupees Fail to Shore Up Russia’s Usable oil Income but Provides New Revenue Stream

But claims that India and Russia have stopped talking about trade in Indian rupees are not true.

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Joseph P Chacko
Joseph P Chacko
Joseph P. Chacko is the publisher of Frontier India. He holds an M.B.A in International Business. Books: Author: Foxtrot to Arihant: The Story of Indian Navy's Submarine Arm; Co Author : Warring Navies - India and Pakistan. *views are Personal

In the first five months, the Russian Ministry of Finance withdrew approximately 440 billion rubles (5.6 billion USD) from the National Wealth Fund (NWF) to cover the federal budget deficit. In June, this practice will continue. The country’s oil and gas income has dropped by half compared to the same period in 2022. The data came as a shocking surprise as it was noted that previously stalled in India, oil exports could have helped the situation.

In the first five months of the year, these revenues totalled roughly 2.9 trillion rubles (35.55 billion USD), almost 50 per cent less than the same period in the previous year. The ministry attributed this steep decline to the high comparison base of the prior year, a decline in Urals crude oil prices, and a decrease in natural gas export volumes. The Ministry of Finance clarified that the monthly dynamics of oil and gas revenues are progressively stabilising at their base level of 8 trillion rubles per year (102.1 billion USD).

Another statement from the minister made this news seem even worse. In May, oil and gas income fell short of what the budget needed by about 31 billion rubles (3.8 billion USD). This difference is between how much oil and gas money the ministry got in May and how much it expected to get each month. The Ministry of Finance thinks June will also have a shortfall of about 44 billion rubles (5.3 billion USD).

To make up for falling oil and gas revenues, the Ministry of Finance is selling yuan and gold from the NWF, and the Central Bank is doing the same by selling yuan on the exchange, say analysts from the Telegram channel MMI, who take part in the Central Bank’s regular macroeconomic surveys.

So, the Ministry of Finance plans to take nearly 75 billion rubles (1 billion USD) out of the NWF in June and use them to cover the federal budget shortfall. In the meantime, monthly reports from the ministry from January to May show that almost 440 billion rubles (USD 5.77 billion) have already been removed from the NWF to cover the budget shortfall.

Even before that, in May, the Russian Ministry of Foreign Affairs said that the locked billions were a problem. There have been reports that trade talks in rupees have ceased. In May, Sergey Lavrov, the Russian Minister of Foreign Affairs, faced this question in Panaji. The answer from Lavrov, which is on the ministry’s website, says this is a problem. Lavrov said that Russia needs to use the billions of rupees it has in accounts at Indian banks. But right now, these rupees need to be changed into something else. He said that the problem is being discussed.

This question was asked at the time because Reuters reported that India and Russia had chosen to stop using the Indian national currency to settle their debts. But claims that India and Russia have stopped talking about trade in Indian rupees are not true, as the newspaper New Indian Express said at the time, citing Indian government sources.

There are questions about how Russia could use the extra rupees in “vostro” accounts, which are special accounts in the local currency. However, the Indian government sources told the newspaper that talks are going on to settle these differences.

But the flow of Russian oil to India has its benefits

TASS reports that a Roscongress study found that India kept buying more Russian oil at the beginning of 2023 and planned to buy more Russian oil products.

According to Roscongress, modernising India’s power infrastructure with an investment of $106 billion by 2030 could present a new sales opportunity for Russian companies. In addition, Russian companies can play a significant role not only in the supply of oil and oil products but also in equipment for Indian refineries or even directly participate in the capital of Indian energy companies to profit from the future development of this sector.

According to the study, Novatek has already taken its first steps into the Indian gas market by signing a memorandum with the Indian DFPCL to provide LNG and low-carbon ammonia. In addition to being an LNG supplier, the company intends to expand the Indian market in terms of consumption growth and invest in regasification terminals and LNG fueling stations.

The participation of Russian companies in the TAPI gas pipeline project (Turkmenistan – Afghanistan – Pakistan – India) is another prospective area of cooperation. Midway through January 2023, Russian Energy Minister Nikolai Shulginov stated that Russia’s participation in the project was not ruled out.

In addition, Rosatom is constructing four sections of the Kudankulam nuclear power plant in India and discussing the construction of six additional nuclear power units outside this project’s scope. According to the specialists at Roscongress, the construction of new units will increase the export of nuclear fuel. In particular, $60 million worth of nuclear fuel and equipment for nuclear power facilities were shipped to India between 2019 and 2022.

The Roscongress writes that cooperation in nuclear energy opens the door to other areas of cooperation. In particular, Rosatom sponsored the formation of a consortium that develops software for the engineering modelling of products and structures.

According to experts, cooperation between the two nations in the field of hydrogen energy is also feasible.

According to the International Energy Agency (IEA), India’s energy consumption will increase by 3% per year over the next ten years; however, the Indian government anticipates a faster rate of development over the next five years, at 7.5% per year. According to the study, the nation is on the cusp of a meteoric increase in electricity consumption. India is the third largest car market globally, but only 7.6% of households own a vehicle.

The Indian Ministry of Energy predicts a 1.5-fold rise in the country’s power generation capacity during the next five years, from 10 GW to 575 GW. It predicts that the country’s proportion of global oil consumption will rise from 6% to 11% by 2030 and that oil refinery capacity will increase from 250 million to 450 million tonnes per year. The proportion of petrol in the nation’s energy balance will increase from 6% to 15% by 2030, as its consumption increases sixfold. India intends to provide 300 million rural residents with access to natural gas by 2030.

Hardeep Singh Puri, India’s Minister of Petroleum and Natural Gas, has stated that India’s energy demand growth rate would be the quickest in the world over the next two decades, accounting for approximately 28% of the global energy consumption growth. 


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