Indian oil companies are facing a significant challenge in the realm of international energy investments. As of September 2025, around $1.4 billion in dividends from Russian oil projects are stuck in Moscow, caught up in a web of Western sanctions. This situation has developed since the onset of the Russia-Ukraine conflict in 2022, highlighting the difficult position Indian companies are in while trying to secure energy supplies amidst geopolitical tensions.
For those interested in the dynamics of Indian oil investments in Russia or the effects of sanctions on energy trade, this situation reveals both potential rewards and serious risks tied to India’s growing partnership with Moscow. Let’s explore what is happening, the reasons behind the money being trapped, and what the future may hold.
History of Indian Investments in Russian Oil
India’s push into Russian oil started over ten years ago, driven by a need to diversify energy sources and secure affordable crude oil for its thriving economy. Companies like ONGC Videsh Limited (OVL), Indian Oil Corporation (IOC), and Bharat PetroResources Limited (BPRL) have invested billions in various projects.
Some core investments include:
- OVL’s 26% stake in the Vankor cluster, acquired for about $2.02 billion.
- OVL’s 20% stake in the Sakhalin-1 project, part of a larger consortium.
- A joint stake by IOC, OIL, and BPRL in Vankor and Taas-Yuryakh, costing around $3.2 billion.
The goal was to generate steady returns from oil and gas production, aiding the recovery of investments and supporting domestic refining. Up until 2022, transferring profits back to India was straightforward. However, the Ukraine invasion triggered extensive U.S. and EU sanctions, complicating these transactions and freezing dollar-based transfers.
By mid-2025, the trapped funds had swelled to $1.4 billion, with the IOC-OIL-BPRL consortium holding nearly $1 billion of that amount. For OIL, $330 million remains stuck in Moscow, despite previous dividends returning over 91% of its $1 billion investment.
Barriers to Repatriation
The main issue is the absence of a viable channel for repatriation under current sanctions. Dividends may still flow into accounts at an Indian bank in Moscow, but transferring them back to India is impossible.
- Western Sanctions: U.S. and EU restrictions have targeted Russian banks, hampering access to international payment systems and blocking dollar conversions.
- Rupee-Ruble Trade Issues: Efforts to conduct trade in local currencies present complexities, making oil payments difficult amidst fluctuating discounts and scrutiny from the U.S.
- Rising Tensions: Actions such as U.S. threats of tariffs on Indian imports have intensified pressure on India’s energy deals with Russia.
This predicament isn’t unprecedented; back in 2022, 8 billion rubles (roughly $100 million at that time) were already trapped. However, with Russia now being India’s leading oil supplier, surpassing Iraq and Saudi Arabia, the stakes have significantly increased.
Implications for Indian Firms
For Indian companies, the trapped dividends represent more than just numbers on a balance sheet. They pose challenges for expansion and shareholder dividends. OIL’s Chairman, Ranjit Rath, expressed hopes that full recovery might take place in the next fiscal year, but uncertainties remain. OVL is in a similar situation with $350 million also inaccessible.
The impact on India’s energy landscape is significant:
- Benefits of Russian Oil: Discounts on Russian crude have saved Indian refiners about $13 billion over two years, helping stabilize fuel prices but straining relations with the U.S.
- Trade Consequences: The situation is complex; while the U.S. imported $1.4 billion in Indian refined products from January to July 2025, these were often processed from Russian oil.
- Investment Choices: With funds currently unusable, companies are considering reinvesting in Russian operations or spending locally, though new investments are not appealing amidst uncertain geopolitical conditions.
Looking Ahead
Indian officials remain hopeful about the situation, considering the funds “safe” and eventually recoverable. Plans include:
- Diplomatic Engagements: India and Russia are ongoing dialogues to streamline payment methods, possibly unlocking the trapped dividends.
- Alternative Financial Routes: Exploring ways to use the funds through non-sanctioned entities or offsetting against future oil purchases.
- Long-term Strategies: As diplomatic efforts evolve, India may diversify further to secure oil from the Middle East and West Africa.
This scenario illustrates the complexities of India’s foreign policy; while affordable Russian oil promotes growth, the sidelined assets present tangible vulnerabilities.
Conclusion
The $1.4 billion stuck in Russia serves as a crucial reminder of how sanctions can disrupt global energy markets. As Indian firms like IOC and OIL seek solutions, they must navigate the balance between immediate gains and future security. For anyone following Russia-India energy relations or the impact of global sanctions on energy, this situation continues to evolve.
