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Thursday, 11 December 2014 00:00
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Oil collapse presents perfect setting for Putin visit

Given Russia’s rapidly worsening relations with the West, prime minister Narendra Modi could find it tougher to carry on negotiations with Russian president Vladimir Putin later today, more so because of Russia’s closer ties with China now. But given this hasn’t stopped Modi from getting US president Barack Obama to be the chief guest at the Republic Day celebrations, the PM is clearly a better negotiator than most imagined, concentrating on commercially viable deals for the time being. And several of those are expected, ranging from those in defence to those in petroleum. Among the defence deals being talked of are those on joint development of the 5th-generation fighter aircraft and the BrahMos mini missile along with a multi-role transport aircraft. Greater cooperation between the two countries on diamond trading is also expected, and if successful, that could be a big breakthrough since there is talk of Russia using India as a diamond hub—Russia is the world’s largest producer of diamonds and India the world’s largest cutting and polishing centre for low-value diamonds.

More significant will be the negotiations on petroleum with Russia keen to find a non-European demand centre of the type it found in
China with whom it just signed a $400 billion deal that could see Russia supplying up to a fifth of Chinese demand. The collapse in global petroleum prices presents a good opportunity for India to drive a better deal, and though a gas pipeline—linking to the proposed TAPI one—is being talked of, there are several tricky issues here; so LNG exports are probably a better option for now. Whatever the deal—the costs of gas to China are likely to be in the $11-13 per mmBtu range—it is ironic that this will be way above the price India is willing to pay domestic explorers. If Russia is to get ONGC Videsh Limited (OVL) to invest more in exploration as is being talked of, as FE has reported, it needs to better its terms considerably. Right now, for every R100 OVL earns from its Imperial Energy fields, around R87 is paid back to the government by way of taxes and cesses.

Since both presidents Putin and Obama will be interested in signing more deals for nuclear plants—and to make progress on the existing ones—prime minister Modi will need to urgently address the issue of the nuclear liability Act. That will be difficult, coming as it does on the heels of the 30th anniversary of the Bhopal disaster, but no nuclear supplier—including an Indian one—is going to assume unlimited liabilities for a plant that is to be run by a third party, the Nuclear Power Corporation of India Limited. Without progress on this, the likely MoU for negotiations on Units 5 & 6 at Kudankulam are likely to yield little, as are the deals inked with the US to supply nuclear energy.



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