Indian Oil PSUs Struggle for Russian Dividends

Why in the news?

The Indian oil companies face difficulties repatriating $900 million in dividends from Russian projects due to Western sanctions, creating challenges in global payment systems and investments.

Issue of Stuck Dividends in Russia:

  • Indian oil PSUs (ONGC Videsh, Oil India, IOC, and BPRL) are unable to repatriate $900 million in dividends from Russian investments.
  • The dividends, accumulated over5 years, are stuck in Commercial Indo Bank in Moscow due to Western sanctions on Russia following the Ukraine conflict.
  • Sanctions have blocked major Russian banks from the SWIFT system, complicating global transactions.

Investments and Challenges:

  • Indian oil companies have invested over $6 billion in Russian oil and gas projects like Sakhalin-1, Vankor, and Taas-Yuryakh.
  • Dividends are paid in rubles, earning minimal interest, with $500-650 million belonging to the IOC-OIL-BPRL consortium and $250 million to ONGC Videsh.
  • Using dividends for capital investments is not feasible as most projects are past their capital expenditure cycle.

Indian Oil PSUs Struggle for Russian Dividends

Options and Complications:

  • Indian companies have explored options like using the funds for Russian oil payments, but legal and accounting complexities arise due to sanctions and overseas jurisdictions.
  • A solution may require diplomatic efforts and negotiations between Indian and Russian stakeholders.

Sources Referred:

PIB, The Hindu, Indian Express, Hindustan Times