India Looks to Russia for Reliable Uranium Supply
Alex Kimani

For the first time in five years, Indian Prime Minister Narendra Modi landed in Russia for a state visit on Monday, where he is holding talks with President Vladimir Putin to help re-energize relations between the two countries, with an eye on strategic deals. One item on the top of the agenda is Modi’s desire to finalize a long-term uranium supply deal with Russia, in a bid to secure a stable and reliable source of uranium for India's expanding nuclear power sector.

It would be a big score for both India and Russia, and Washington is paying attention closely because India is the key element of the U.S. plan to contain China, first and foremost, and Russia, secondarily. Modi can influence them both. India already gets a pass on Russia oil and gas sanctions, and Washington will have little choice other than accept the same for Russian uranium. 

The two allies are likely to agree on a long-term uranium supply pact for a nuclear power plant coming online in Tamil Nadu, said senior officials with knowledge on the matter. Cooperation in the civilian nuclear sphere doesn’t fall under the sanction regime by the U.S. and its western allies for Russia’s war on Ukraine. Russia’s state nuclear company Rosatom previously supplied nuclear fuel to India’s Kudankulam nuclear plant in 2022 and 2023.

“Kudankulam Nuclear Power Plant units 1 and 2 have already become operational, and the work is progressing on units 3 and 6,” India’s Foreign Secretary Vinay Kwatra said on Friday, adding that Moscow “remains an important partner for India’s energy security and defense.”

Currently, India gets the bulk of its uranium from mines in the northern state of Jharkhand. Unfortunately,  the state’s  uranium reserves are fast depleting while efforts to exploit deposits in other states such as Andhra Pradesh and Meghalaya have failed to meet expectations thus forcing the country to increasingly rely on imports. India currently relies on spot deals for the procurement of the fuel with nations including Kazakhstan, France, Russia, Canada and Uzbekistan.

India To Drive Future Global Oil Demand

The global nuclear sector is enjoying a new dawn, with the U.S., Europe, and now India increasingly embracing nuclear as a low-carbon energy source. However, India’s economy is likely to continue relying on fossil fuels as its primary energy source for decades to come.

For decades, China has done the majority of the heavy lifting when it comes to global oil demand growth thanks to an economy that maintained a blistering growth clip for a long stretch. China’s economy grew at an average 10% annual clip ever since Beijing embarked on economic reforms in 1978, taking GDP from $1.2 trillion in 2000 to nearly $18.5 trillion in 2024. But the law of large numbers has already kicked in, with economic pundits now predicting that China’s economic growth rate will slow down to between 2 and 5 percent in the coming years thanks to a declining population and slowing productivity.

More importantly, analysts have projected that India will soon replace China as the main driver of global oil demand growth. Over the past decade, the Asia-Pacific region accounted for 79% of global oil demand growth with China alone accounting for 58%.

“China’s role as a global oil demand growth engine is fading fast,” Emma Richards, senior analyst at London-based Fitch Solutions Ltd, has told The Times of India. According to the analyst, over the next decade, China’s share of emerging market oil demand growth will decline from nearly 50% to just 15% while India’s share will double to 24%. India’s rapidly growing population--which has likely surpassed China’s--is expected to be the main driver of consumption trends in India. Indeed, India's oil consumption increased by 3.7 million tonnes (4.8 per cent) in the first four months of 2024 compared to the corresponding period in 2023, with consumers, rather than industry, driving the growth.

Meanwhile, the country’s transition from traditional gasoline and diesel-fueled transport is expected to lag other regions, in sharp contrast to China’s skyrocketing adoption of electric vehicles and clean energy in general.

“India was always going to exceed China in a matter of time in terms of being the global demand growth driver, mainly due to demographic factors like population growth,” Parsley Ong, the head of Asia energy and chemicals research at JPMorgan Chase & Co. in Hong Kong, has told Bloomberg.

India has also doubled down on coal. Last year, India’s coal minister declared that the country will not ditch coal from its energy mix any time soon. Addressing a parliamentary committee, minister Pralhad Joshi said that coal will continue to play an important role in India until at least 2040, referring to the fuel as an affordable source of energy for which demand has yet to peak in India.

"Thus, no transition away from coal is happening in the foreseeable future in India," Joshi said, adding the fuel will continue to play a big role until 2040 and beyond.

The stunning declaration came across as defiance to calls to countries to phase out the carbon-heavy fossil fuel. Last year at the COP27 talks, U.N. Secretary General Antonio Guterres called for urgent action to cut emissions, including phasing out coal by 2040 globally. 

By Alex Kimani for Oilprice.com

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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