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. Last Updated: 07/27/2016

Ivanov Offers India an Oil Stake

Itar-TassA Mig-29 fighter jet being ceremonially handed over to Indian military officials at a Moscow region airfield Monday.
Deputy Prime Minister Sergei Ivanov on Monday signaled that India's state energy firm ONGC would be invited to join Rosneft in a new oil and gas venture on Sakhalin Island, setting up the prospect of a series of major energy deals during President Vladimir Putin's visit to India, which begins Thursday.

Ivanov, leading an advance party of government officials in the country looking at a range of energy and defense deals, said Moscow was "interested in the participation of Indian capital in the development of Sakhalin-3 project," Itar-Tass reported.

Ivanov's comments could indicate that India is about to join China as a strategic partner for Russian state firms as the Kremlin seeks to balance its energy partnerships between East and West.

U.S. oil majors ExxonMobil and Chevron were part of a consortium that signed a preliminary deal to develop Sakhalin-3, which holds an estimated 4.6 billion barrels of oil equivalent. But that consortium was dissolved and the field is now up for grabs again.

In addition to Sakhalin-3, ONGC is thought to be in the running to buy into other Russian energy assets in partnership with Russian state energy firms, including the remaining Yukos assets up for auction and a 20 percent stake in Gazprom Neft.

"India has been pushing as well -- they can't get a direct pipe, but they've been pushing for joint venture status or a big block of equity," said Chris Weafer, chief strategist at Alfa Bank.

Before offering these to India, however, Russia will likely ask India to commit to buying more Russian arms and helping Russia develop its IT sector, Weafer said.

India has long sought to nuzzle up to Russia's energy wealth and know-how. ONGC already owns a 20 percent stake in the $17 billion Sakhalin-1 development, in which Exxon and Rosneft hold stakes.

Rosneft sold half of its $10.6 billion initial public offering last July to four strategic investors -- BP, Malaysia's Petronas, China's CNPC and a mystery buyer last summer. Analysts have speculated that India's ONGC may have been that buyer.

Chinese state energy firms are already partners in smaller fields within the Sakhalin-3 area after a joint venture deal was reached during Chinese President Hu Jintao's 2005 visit to Moscow.

The Russian delegation on Monday also moved to cement ties with India across a range of energy and other projects.

Officials reached a deal Monday to provide fuel for two Indian nuclear reactors in Bangalore.

Supplies of nuclear fuel to the Kudankulam nuclear power plant near the southern tip of India will begin in the second quarter of this year and will last for the life of the reactors, said Sergei Kiriyenko, head of the Federal Atomic Energy Agency.

Under the provisions of the Nuclear Suppliers Group, or NGS, a voluntary organization, Russia pledged not to provide atomic fuel to India.

Kiriyenko insisted that the provisions did not apply to the first two reactors at Kudankulam because they were contracted out to Russia before it joined the NGS, Interfax reported.

The first deal to build the reactors was signed between India and the Soviet Union in 1988, according to Atomstroiexport, the state-run company that builds nuclear equipment abroad.

"Today's cooperation fully falls in line with all the norms of international law, and we therefore proceed with confidence," Kiriyenko said. He added that the NGS sanctions should not apply to India because of its clean record of nuclear nonproliferation, the agency reported.

All of the main current suppliers of uranium -- including the United States, France, Britain, Japan and Russia -- have spoken out against the sanctions forbidding uranium supplies to India, said Adrian Collings, director of policy development of the World Nuclear Association by telephone from London on Monday.

The move to bring the fuel to India should therefore not get Russia into trouble with the United Nations or the NGS, he added.

Atomstroiexport is leading construction of both of the 1,000-megawatt reactors in Kudankulam. The first of these will come on line this year and the second in 2008, Kiriyenko said.

"That was the main aim for today, and we've wrapped it up," Kiriyenko's assistant Sergei Novikov said by telephone from Bangalore.

On Tuesday, Ivanov is scheduled to meet with India's defense minister and national security adviser in New Delhi, and Wednesday he will co-chair a meeting of the India-Russia Intergovernmental Commission on Military-Technical Cooperation.

The head of the Russian government's International Military Cooperation Department, Anatoly Mazurkevich, told reporters Friday that Ivanov's Wednesday meeting would focus on plans with India to build a fifth-generation fighter plane and transport aircraft.

Military cooperation between Russia and India planned over the next four years includes more than 200 projects worth about $20 billion, Itar-Tass reported Monday.

After China, India is the biggest importer of Russian arms. It has bought more than $30 billion worth of Soviet and Russian arms since 1960 and now accounts for about 30 percent of Russian weapons exports.

During Putin's visit, Indian officials expect him to sign a $230 million deal financed by state-owned Vneshtorgbank to build a titanium plant in the Indian state of Orissa, a spokesman for the Federation of Indian Chambers of Commerce and Industry said Monday.