{"id":35687,"date":"2023-05-28T01:34:51","date_gmt":"2023-05-27T20:04:51","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=35687"},"modified":"2025-04-21T10:06:46","modified_gmt":"2025-04-21T04:36:46","slug":"dividends-of-indian-oil-psus-are-stuck-in-russia","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/dividends-of-indian-oil-psus-are-stuck-in-russia\/","title":{"rendered":"Dividends of Indian Oil PSUs Are Stuck in Russia"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in news?<\/strong><\/li>\n<li><strong>What is Society for Worldwide Interbank Financial Telecommunication (SWIFT)?<\/strong><\/li>\n<li><strong>News Summary: Dividends of Indian oil PSUs are stuck in Russia<\/strong><\/li>\n<li><strong>Why the dividends of Indian oil PSUs are stuck in Russia?<\/strong><\/li>\n<li><strong>India\u2019s investments in Russian oil assets<\/strong><\/li>\n<li><strong>Options available to Indian oil PSUs and associated challenges<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why in news?<\/strong><\/h2>\n<ul>\n<li>The dividend income of many Indian public sector oil companies from their investments in Russian projects are stuck in Russia since the war broke out.\n<ul>\n<li>The companies include ONGC Videsh (OVL), Oil India (OIL), Indian Oil Corporation (IOC), and Bharat PetroResources (BPRL).<\/li>\n<\/ul>\n<\/li>\n<li>This is due to the payment channel-related issues in the aftermath of Russia\u2019s February 2022 invasion of Ukraine.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is Society for Worldwide Interbank Financial Telecommunication (SWIFT)?<\/strong><\/h2>\n<ul>\n<li><strong>About<\/strong>\n<ul>\n<li>SWIFT is a cooperative organization <strong>headquartered in Belgium<\/strong> that <u>provides a secure messaging network for financial institutions worldwide<\/u>.<\/li>\n<li>\u00a0It was founded in 1973 and operates a standardized system for transmitting financial transaction messages between banks and other financial institutions.<\/li>\n<li>SWIFT has become a vital component of the global financial system, connecting over 11,000 financial institutions across more than 200 countries.\u00a0<\/li>\n<li>It plays a crucial role in facilitating international transactions and promoting financial stability by providing a reliable and standardized means of communication between banks.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Function<\/strong>\n<ul>\n<li>Its primary function is to facilitate the secure exchange of information and instructions related to financial transactions.\n<ul>\n<li>These transactions include money transfers, securities trading, and treasury operations.<\/li>\n<\/ul>\n<\/li>\n<li>It enables <u>banks and financial institutions to communicate with each other in a standardized and secure manner<\/u>, ensuring the integrity and confidentiality of the transmitted data.<\/li>\n<li>While SWIFT facilitates the exchange of financial messages, <strong>it does not handle the actual movement of funds<\/strong>.\u00a0\n<ul>\n<li>The responsibility for executing transactions lies with the participating financial institutions.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Working<\/strong>\n<ul>\n<li>The SWIFT network allows member institutions to send and receive messages using a unique identification code called the <strong>Bank Identifier Code (BIC).<\/strong>\u00a0<\/li>\n<li>These messages contain instructions and details about the transfer of funds or other financial transactions.\u00a0<\/li>\n<li>SWIFT ensures that these messages are securely delivered to the intended recipient and provides confirmation of receipt.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>News Summary: Dividends of Indian oil PSUs are stuck in Russia<\/strong><\/h2>\n<ul>\n<li>Dividend income of Indian oil PSUs, amounting over $300 million, are stuck in Russia since the Ukraine war broke out.<\/li>\n<li>Indian companies were receiving regular dividend income from their investments in Russia until the invasion of Ukraine in February 2022.<\/li>\n<li>However, they have not been able to repatriate the dividend income since the war began.\n<ul>\n<li>Russian companies operating the projects are releasing dividends to their Indian partners.<\/li>\n<li>However, the money is piling up in an Indian bank in Russia &#8211; Commercial Indo Bank (CIBL).\u00a0\n<ul>\n<li>CIBL used to be a joint-venture of SBI and Canara Bank, but the latter recently sold its stake in the venture to SBI.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why the dividends of Indian oil PSUs are stuck in Russia?<\/strong><\/h2>\n<ul>\n<li><strong>Payment channel-related issues<\/strong>\n<ul>\n<li>Soon after Russia invaded Ukraine, a number of major Russian banks were <u>banned from the SWIFT financial transactions processing system<\/u>.<\/li>\n<li>This seriously constricted Moscow\u2019s ability to access the global payments system.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Curbs imposed by Russian government<\/strong>\n<ul>\n<li>The Russian government too has put curbs on the repatriation of dollars in a bid to keep exchange rate volatility in check.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>India\u2019s investments in Russian oil assets<\/strong><\/h2>\n<ul>\n<li><strong>Amount invested<\/strong>\n<ul>\n<li>Over the years, Indian public sector companies have invested billions of dollars to pick up stake in producing oil and gas projects in Russia.\u00a0<\/li>\n<li>These investments \u2014 adding up to almost $6 billion according to one estimate \u2014 are part of India\u2019s energy security strategy.\n<ul>\n<li>India is heavily dependent on energy imports.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Companies in which investments have been made<\/strong>\n<ul>\n<li>OVL, the overseas investment arm of Oil and Natural Gas Corporation (ONGC), holds a 20% stake in the <i><strong>Sakhalin-1 project<\/strong><\/i> and 26% in <i><strong>Vankorneft field<\/strong><\/i>.\u00a0\n<ul>\n<li>It also owns <i><strong>Imperial Energy<\/strong><\/i>, which has fields in Siberia.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li>A consortium of IOC, OIL, and Bharat Petroleum Corporation\u2019s (BPCL\u2019s) upstream arm BPRL has 23.9% share in <i><strong>Vankorneft<\/strong><\/i> and 29.9% in <i><strong>Taas-Yuryakh Neftegazodobycha fields<\/strong><\/i>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Options available to Indian oil PSUs and associated challenges<\/strong><\/h2>\n<ul>\n<li><strong>The money can be used to partly pay for India\u2019s ballooning purchases of Russian crude<\/strong>\n<ul>\n<li>This is challenging as IOC and BPRL\u2019s parent BPCL do buy Russian oil, OIL does not.<\/li>\n<li>Also, <u>the investments in Russian projects are through special purpose vehicles (SPVs) registered in overseas territories like Singapore<\/u>.\u00a0<\/li>\n<li>This means that any payment dealing with Russian oil in this case would also come under the jurisdiction of overseas territories, and not just Russia and India.\n<ul>\n<li>There are various Western sanctions against Russia and its energy sector.\u00a0<\/li>\n<li>Therefore, cross payments for Russian oil using this dividend income could end up becoming an extremely complex exercise from taxation and accounting standpoints.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>The dividend income could be for future investment in the same projects<\/strong>\n<ul>\n<li>But the challenge there is that the assets that Indian companies are invested in are past their major capital expenditure cycle, and are <u>now producing assets<\/u>.\u00a0<\/li>\n<li>This means that major cash calls, or demand for more investment in the projects, are highly unlikely in the near-to-medium term.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1)\u00a0What is ONGC Videsh Limited (OVL)?<\/strong><\/h3>\n<p>ONGC Videsh Limited (OVL), also known as ONGC Videsh, is the international arm of Oil and Natural Gas Corporation Limited (ONGC), which is India&#8217;s largest oil and gas exploration and production company. OVL is a wholly-owned subsidiary of ONGC and was established in 1965. Its primary objective is to explore and produce oil and gas resources outside of India.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2)<\/strong>\u00a0<strong>What is Russian currency?<\/strong><\/h3>\n<p>The currency of Russia is the Russian Ruble (RUB). The ruble is the official currency of the Russian Federation and is represented by the symbol &#8220;\u20bd&#8221; or &#8220;RUB&#8221;. One ruble is subdivided into 100 kopeks, although kopek coins are not commonly used in everyday transactions.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:\u00a0<\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/300-million-dividends-indian-oil-psus-stuck-in-russia-8631865\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>More than $300 million dividends of Indian oil PSUs are stuck in Russia. Why \u2014 and what now?<\/u><\/a>\u00a0|\u00a0<a href=\"https:\/\/www.swift.com\/about-us\" target=\"_blank\" rel=\"nofollow noopener\"><u>SWIFT<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Dividend income of many Indian public sector oil companies from their investments in Russian projects are stuck in Russia.<\/p>\n","protected":false},"author":5,"featured_media":35688,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-35687","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/35687","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=35687"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/35687\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/35688"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=35687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=35687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=35687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}