Russia is exploring the possibility of developing a railway route that could eventually provide the country with land-based access to the Indian Ocean and connect it with India, Russian Deputy Prime Minister Marat Khusnullin has said.
In an interview with Russian news agency TASS, Khusnullin said Moscow should examine alternative transport routes to reduce its dependence on key maritime chokepoints, including the Bosphorus and the Strait of Hormuz.
According to Khusnullin, one possible option could involve a railway corridor running from Russia through Turkmenistan, Iran, Afghanistan and Pakistan before reaching India. He said Russia would consider any route that could provide access to India.
The proposal, however, remains at an exploratory stage. There is currently no confirmed railway route, passenger train service, ticket pricing or launch date connecting Russia and India under the proposed plan.
Khusnullin highlighted the strategic importance of developing alternative routes amid concerns surrounding major maritime passages. The Strait of Hormuz is among the world’s most important shipping routes, with around 25 per cent of global oil trade and nearly 20 per cent of LNG shipments passing through it.
The Russian Deputy Prime Minister said concerns linked to the Bosphorus and the Strait of Hormuz underline the need to explore alternative land-based transport corridors.
A railway connection towards India could provide Russia with another route to move goods towards the Indian Ocean without relying entirely on maritime transportation. It could also potentially strengthen Russia’s overland connectivity with Central and South Asia.
For India, such a corridor could open up new possibilities for connectivity with Russia and countries across Central Asia. If the proposed land link eventually takes shape, it could also create opportunities for greater movement of people and potentially facilitate tourist travel between the regions.
The proposal assumes significance as Russia considers a direct land-based connectivity option towards India. However, the route would involve several countries and require extensive infrastructure development, as well as coordination on transit, security and cross-border movement.
Meanwhile, India could withstand the loss of discounted Russian oil more comfortably than a prolonged surge in global crude prices to $100 a barrel, according to Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities.
The assessment comes amid growing pressure on countries importing Russian energy and speculation that India could be forced to reduce its purchases from Moscow.
Discount shrinks
Russian crude emerged as an important source of cheaper oil for India following the outbreak of the Russia-Ukraine war, with discounts at one stage reaching $15-$20 per barrel.
However, that price advantage has narrowed considerably. Banerjee, as quoted by ANI, said discounts on Russian crude have fallen to around $2-$3 per barrel.
India spends nearly $150 billion annually on crude imports, while the benefit from discounted Russian supplies is estimated at just $2-$3 billion a year.
This means replacing Russian barrels with crude from other suppliers could increase costs, but the overall economic impact may remain manageable.
Wider sources
India has also diversified its energy supplies, sourcing crude from more than 40 countries, including producers in the Middle East, Africa and the US.
This wider supplier base could help refiners respond to any disruption in Russian oil flows. Strategic petroleum reserves and commercial inventories provide additional protection against short-term supply shocks.
Bigger threat
A sustained rise in global oil prices, however, could have much larger consequences.
According to Banerjee, every $10 increase in the average price of India’s crude import basket could add about $15 billion to the country’s annual oil import bill.
Crude at $100 a barrel could therefore exert significantly greater pressure on India’s economy than losing the existing Russian discount.
Higher oil prices could widen the trade deficit, weaken the rupee and increase inflationary pressures. Costlier fuel can also push up transportation and production expenses across industries.
Economic buffer
India has also been developing alternative payment arrangements, including rupee-based trade and bilateral settlement mechanisms, to reduce risks arising from geopolitical disruptions.
The key risk, therefore, is not necessarily losing access to cheaper Russian barrels. A prolonged global crude price shock would have far wider consequences for India’s import costs, inflation and external finances