Why Modi Summit Is a Hollow Victory for Putin

Indian Prime Minister Narendra Modi chalked up a big win during his state visit to Russia earlier this month, but his Moscow counterpart Vladimir Putin failed to secure cooperation in a key area of concern.

India is flexing its leverage over heavily sanctioned Russia as a major buyer of its oil, but New Delhi is "walking a tightrope," one analyst told Newsweek.

India's increasing oil purchases have been a boon to Russia's economy amid Moscow's international isolation over its invasion of Ukraine. Trade overall has also been booming, with India's Trade Ministry reporting a record $65.7 billion of bilateral turnover last year.

Putin's talks with Modi apparently failed to release billions of dollars' worth of oil profits sitting in Indian banks. With Russia's use of U.S. dollars in trade restricted following the 2022 invasion, Moscow has tried to circumvent international sanctions by allowing countries such as India to pay for oil in their local currencies.

However, this has led to up to $1 billion in rupees piling up in Indian banks each month. Reserve Bank of India restrictions have frustrated efforts by Russian companies to repatriate the funds to Russian accounts, converting them into rubles.

Russia has been left with no other option than to invest the stranded oil profits locally in Indian stocks, securities, and infrastructure projects, according to Indian media. Newsweek contacted Russia's Foreign Ministry and India's Ministry of External Affairs via written request for comment.

Russia has been exporting oil at preferential prices to India, a "friendly" country that has withheld sanctions and official criticism of the war in Ukraine. Last month, India was the second-largest purchaser of Russian fossil fuels after China.

Russia is also the source of approximately 40 percent of India's crude oil imports, up from 30 percent in March. Last year New Delhi became the largest importer of Russia's seaborne crude on the back of its discounted barrels.

Despite its rupee dilemma, Moscow has been offering strong diplomatic support for New Delhi, particularly its bid for a permanent seat on the United Nations Security Council. Since the formation of the U.N. in 1945, there have been only five veto-wielding permanent members: China, the United States, the United Kingdom, USSR/Russia, and France.

Adding permanent seats, which wield veto power in the body, would require amending the U.N. Charter through a two-thirds majority vote in the U.N.'s General Assembly. "The process is challenging and the dialogue on expanding permanent membership has been ongoing for a long time. However, our support for India's candidacy, as well as Brazil and the African group, remains steadfast," Russian Foreign Minister Sergey Lavrov said at a press conference earlier this month.

Meanwhile, there are no signs Modi agreed to resume weapon orders from Russia. Russia has for decades been the main supplier of arms to India, the world's top weapons buyer, comprising 36 percent of India's defense imports from 2019 to 2023.

Unconfirmed reports have emerged that the South Asian country has started to scale back its use of aging Russia-made tanks, warships, helicopters, and artillery units. India is also said to have suspended large orders for advanced Russian military hardware and aircraft.

These reports came after Indian complaints earlier this year that Russia is not meeting its deadlines for delivering its S400 mobile air defense platform.

"This saga with the oil certainly shows the balance of power has shifted between Russia and India. New Delhi presently has the upper hand and to some extent can set the terms of deals like this, where Russia is keen to sell a commodity and India is able and willing to buy it," Ian Hall, professor of international relations at Australia's Griffith University, told Newsweek.

Yet risks remain for India, he added. "Moscow is not happy about being paid in hard-to-use rupees nor particularly happy to invest them back into India, as New Delhi is suggesting."

Hall pointed out that India still has a great need for Russian arms sales, particularly regarding its overdue air defense system. "So, India is walking a tightrope here, with Russia as well as with the West."

During his visit, the prime minister criticized Russia's prosecution of the war, telling Putin a solution "cannot be found on the battlefield." He called the deaths of children "unbearable" after a deadly July 8 strike on a Ukrainian children's hospital.

Modi also pressed Putin to return Indians forced to fight alongside Russian troops against Ukrainian forces. Indian media agency NDTV reported that Modi had secured a concession, with Russia agreeing to discharge Indian soldiers from its military and help return them home.

Dozens of Indians have reportedly been lured to Russia by agents promising high-paying jobs, only to be pressed into military service. Putin's spokesperson declined to comment on the agreement.

Rajan Menon, Emeritus Anne and Bernard Spitzer Chair in Political Science at the City College of New York, told Newsweek India-Russia ties are rooted in "cold-eyed pragmatism."

"Politically, Moscow has stood by India since the mid-1950s. On the military front, Russia remains India's largest arms supplier by far, even though it now faces unprecedented competition from other countries," he said.

Given that China is India's primary adversary, New Delhi would have "little to gain" strategically and "much to lose" by shunning Russia while the Kremlin enjoys close ties with Beijing, Menon added. "Taken together, these considerations explain why India has not joined the West in condemning Russia's invasion of Ukraine, let alone imposing sanctions."