India’s $1.4 billion oil dividends stuck in Russia with no way home

Indian public sector oil giants are grappling with a mounting $1.4 billion conundrum: dividend income from Russian oil assets that has been accumulating for more than three years, but remains out of reach.

Despite repeated efforts by both the government and the companies, the funds held in ruble accounts at Commercial Indo Bank in Moscow cannot be repatriated due to sanctions-related restrictions imposed after Russia’s invasion of Ukraine.

The dividends stem from India’s long-term, multi-billion-dollar stakes in Russian energy projects. ONGC Videsh (OVL) alone has around $400 million stuck, while a consortium of Indian Oil Corporation, Oil India, and Bharat PetroResources is unable to access nearly $1 billion.

Sanctions bite, channels choke

The blockade is the fallout of Russia’s exclusion from the SWIFT system and its own restrictions on dollar outflows. Since 2022, Indian companies have continued to receive dividends, but only on paper—the money remains frozen in Moscow, with no international banking channel to carry it home.

The situation is further complicated by the fact that many of these investments were routed through special purpose vehicles registered in third countries like Singapore, pulling in additional layers of legal and jurisdictional hurdles.

Few options, fewer solutions

Exploring alternatives has yielded little. Using the funds for fresh investment in Russia isn’t viable, as most projects are past their heavy spending phases. Even cross-utilization—such as offsetting payments for Russian oil imports—faces regulatory, tax and sanctions complications.

One rare possibility is OVL’s pending $600 million payment for retaining its stake in the Sakhalin-1 project, which it has sought to settle using part of the trapped dividends. But even that faces roadblocks due to currency restrictions.

A problem diplomacy

With every option mired in sanctions and legal tangles, insiders admit the stalemate may only end with a broader easing of Western restrictions on Moscow or a shift in the war’s trajectory. Until then, billions of dollars crucial to India’s energy security remain stuck in Russia’s banking vaults — safe, but untouchable.