In a major development, the Financial Action Task Force (FATF) which leads global action to tackle money laundering, terrorist and proliferation financing, is mulling to put Russia on the "black list" amid the ongoing war against its neighbouring country, Ukraine.
Although it sounds quite familiar amid the fact the intergovernmental organisation had removed Moscow from the list of member counties in February this year, multiple media reports claimed that the Kremlin has been pressuring governments including India to furnish maximum support to save Russia from any catastrophic economic disaster.
According to a recent report published by Bloomberg, several top officials of Russian President Vladimir Putin have been engaged in discussions with their Indian counterparts to circumvent possible action by the United States and its allies.
It is worth mentioning Russia has been nearly isolated ever since it announced a full-fledged war against Ukraine which Moscow dubbed a "special military operation". Nearly all European nations and US allies put pressure on Moscow by imposing back-to-back sanctions on Russia with an aim to penalise Putin for its "unlawful" action. However, countries including India, China and Turkey stayed mostly neutral over Russia’s aggression against Ukraine.
What are FATF's grey list and black list?
FATF identifies countries or jurisdictions with serious strategic deficiencies to counter money laundering, terrorist financing, and financing of proliferation. For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and in the most serious cases, countries are called upon to apply counter-measures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country. This list is often externally referred to as the blacklist. Currently, Myanmar along with Iran and North Korea are on the list of blacklisted nations.
Is it an alarming situation for India?
Earlier last year, the EU and US imposed sanctions on Russian oil, but India continued to purchase at a discounted rate. Besides, Russia remains India's favourite destination for arms purchases.
However, the Bloomberg report claimed the ongoing situation could hamper India's trade relations with its "all-weather" friend- Russia. Quoting a Russian state agency, Bloomberg reported that Russian officials "warned" counterparts in India of a cascade of unpredictable and negative consequences for cooperation in defence, energy and transportation if the FATF adopts new measures against Moscow-- a claim that New Delhi has yet to react.
Further, the Russian news agency claimed that some Russian officials also urged their Indian counterparts to “vocally” oppose any moves by Kyiv to add Moscow to the “black list” of high-risk countries at the meeting, and said even being placed on the lesser “grey list” would cause difficulties.
Recently, Prime Minister Narendra Modi met Ukraine's President Volodymyr Zelenskyy in Japan's Hiroshima during the G7 Summit, where India advocated for peace talks through dialogue and diplomacy. The move, according to multiple Russian news outlets, was not appreciated by Moscow officials. However, none of them criticised India publically.
Can India save Russia from being placed on a blacklist?
Notably, the FATF holds countries to an account that does not comply with the FATF Standards. If a country repeatedly fails to implement FATF Standards then it can be named a Jurisdiction under Increased Monitoring or a High-Risk Jurisdiction. These are often externally referred to as “the grey and black lists”. Currently, there are 98 countries, the majority of which are either European or US allies countries which have already imposed sanctions on Russia. If India supports Moscow, it would be quite difficult for Russia.
Why Russia has chosen India as its reliable partner?
It is worth noting that India is the world’s third-largest oil-consuming and importing nation. It imports 85 per cent of its crude oil needs. Crude oil is converted into fuels like petrol and diesel at refineries. However, ever since the war between Russia and its neighbouring nation started last year, the West and Europe imposed stringent sanctions on its energy. This resulted in Russia's offering more discounts to its oldest ally, India. Therefore, Russia believes New Delhi could save it from getting placed on the blacklist.
Where did India's trade with Moscow stand before the Russia-Ukraine war?
Prior to the Russia-Ukraine conflict, more than 60 per cent of the Indian crude basket was made up of Middle Eastern crudes, with the remainder made up of North American crudes at around 14 per cent, West African crudes at around 12 per cent, and Latin American crudes at around 5 per cent, with Russian grades accounting for only about 2 per cent.
According to data from energy cargo tracker Vortexa, New Delhi's import of crude oil from Moscow increased further in December 2022, topping 1 million barrels per day (BPD) for the first time. The data claimed that Moscow remained its top oil supper for the third month in a row.
Russia, which made up for just 0.2 per cent of all crude oil India imported in the year to March 31, 2022, supplied 1.19 million bpd in December.
Indian government's vehement stand over Russian imports
The Indian government has been vehemently defending its trade with Russia, saying it has to source oil from where it is the cheapest. The government has previously indicated that oil companies will continue to buy oil from Russia outside the price cap.
External Affairs Minister S Jaishankar on December 7 told the Rajya Sabha that Indian refiners will continue to look for the best deals in the interest of the country. “We do not ask our companies to buy Russian oil. We ask our companies to buy oil (based on) what is the best option that they can get. Now, it depends on what the market throws up,” he had said while replying to clarifications sought by MPs on his suo moto statement on foreign policy.
