Indian oil companies are still waiting for dividends worth $300-$400 million from their investments in Russian oil projects, which are stuck due to the impact of Western sanctions. These sanctions are aimed at Russia’s oil industry and its ties to the Russian government, in response to Moscow’s actions in Ukraine and its alleged involvement in the poisoning of a former spy in the UK.
Indian firms, including ONGC Videsh, Indian Oil Corporation (IOC), and Oil India, have investments in several Russian oil projects, including Sakhalin-1, Vankor, and Taas-Yuryakh. These projects have been hit by the sanctions, which have made it difficult for the Russian firms to pay dividends to their foreign partners.
The situation is becoming increasingly challenging for Indian companies, which have been banking on these dividends to boost their financial performance. The delay in dividend payments is not only affecting the profitability of these companies but also putting pressure on their cash flow, as they are already grappling with the impact of the pandemic.
ONGC Videsh, the overseas investment arm of state-owned Oil and Natural Gas Corporation, has the highest exposure to Russian oil projects, with a 20% stake in Sakhalin-1 and a 26% stake in Vankor. Indian Oil Corporation has a 17% stake in Taas-Yuryakh, while Oil India has a 23.9% stake in Vankor.
The Indian government has been engaging with Russia on the issue of delayed dividends and seeking a resolution to the matter. The two countries have had several rounds of talks on the matter, but so far, no concrete solution has been found.
The Indian government has also been exploring the possibility of using a special purpose vehicle (SPV) to route the dividend payments, bypassing the Western sanctions. However, this option is not without its challenges, as it requires the approval of both the Indian and Russian governments, as well as compliance with international sanctions regulations.
The Indian companies have been cautious about commenting on the issue, given the sensitivity of the matter. However, they have acknowledged that the delay in dividend payments is a cause for concern and have expressed hope that a solution will be found soon.
The situation highlights the challenges faced by Indian companies investing in the energy sector, particularly in countries where geopolitical tensions and sanctions are a factor. The delays in dividend payments from Russian oil projects serve as a reminder of the risks involved in overseas investments and the need for companies to have a well-thought-out risk management strategy.
Overall, the situation is a reminder of the need for Indian companies to diversify their investments and reduce their dependence on a few key assets. It also highlights the importance of engagement between the Indian and Russian governments to resolve the issue and ensure the smooth functioning of these investments.
