Indian public sector oil companies are in a tough spot. They’re trying to get back $1.4 billion in dividend income that’s been stuck in Russia for over three years. Despite ongoing efforts, a solution remains elusive.
The funds are safe in an Indian bank in Moscow, as dividends from investments in Russian oil projects are being deposited regularly. But accessing that money has proven challenging.
These stranded dividends come from Indian companies that have invested over $6 billion in Russian oil and gas. This investment is vital for India’s energy security, as the country relies heavily on oil imports.
Key players include ONGC Videsh (OVL), which has significant stakes in various Russian projects. OVL holds a 20% share in the Sakhalin-1 project and 26% in the Vankor project. Their share of the stuck dividends is close to $400 million. Another group made up of Indian Oil Corporation (IOC), Oil India (OIL), and Bharat Petroleum also has significant stakes and controls around $1 billion in stranded dividends.
The repatriation process hit a wall after Russia’s invasion of Ukraine. Sanctions and restrictions on financial transactions have complicated matters. Since many Russian banks can no longer access the SWIFT system, transferring money globally has become difficult. Additionally, Russia has barred the outflow of U.S. dollars to stabilize its economy.
Most of the Indian companies’ investments are structured through special purpose vehicles (SPVs) based outside India, complicating any potential repatriation. Government and corporate discussions haven’t yielded a viable solution due to the sanctions on Russia’s financial sector.
Experts suggest that peace in Ukraine and eased sanctions might be the only way to access these funds. Until then, the companies are left with limited options.
While repatriating the funds isn’t realistic right now, Indian companies have explored ways to use the money within Russia. They could potentially make payments for operational needs or inject more capital into existing projects. However, these options are challenging. Most projects have already passed their major spending phase, limiting new investment opportunities.
OVL faces a unique situation. They need to pay about $600 million to maintain their stake in Sakhalin-1 and are negotiating to use stranded dividends for this payment. But complications with currency transactions are holding them back. Aside from this, there are no plans for new investments in other Russian projects from these companies.
On the flip side, using the stranded dividends to pay for Russian oil, which is being purchased by IOC and BPCL, also presents issues. Since the investments are held through overseas SPVs, any payment tied to Russian oil would involve multiple jurisdictions and be difficult due to existing sanctions.
To address these challenges, Indian oil companies are consulting with legal and accounting experts. Finding a practical solution will likely require a mix of smart negotiations and careful diplomacy. As they navigate this complicated financial landscape, their strategies will need to adapt to an ever-changing global situation.
For more insights about financial hurdles faced by companies globally, you can visit [this source](https://www.bloomberg.com) for the latest information and expert opinions.
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