Sanctions checkmate? India is using “frozen” dividends to hold on to Russian oil from Sakhalin-1.

The latest example of energy realpolitik comes from the Russian Far East, where India has found a way to maintain its precious stake in the Sakhalin-1 oil project, using precisely the funds that sanctions had blocked, as Reuters reports . All this while circumventing, or better yet, exploiting, Western sanctions themselves.

The paradox of frozen rubles

The Indian state-owned company ONGC (Oil and Natural Gas Corporation Limited) , through its foreign division ONGC Videsh, owns a 20% stake in the Sakhalin-1 project. However, to maintain this stake, it must contribute to a specific fund earmarked for future well decommissioning (the so-called abandonment fund ). This is a mandatory expense worldwide.

Here's the technical problem: due to US sanctions and exclusion from SWIFT circuits, Indian companies found themselves unable to move capital, with approximately $800 million in accumulated dividends blocked in Russia.

The solution? Moscow has given the green light to a purely pragmatic operation: ONGC will be able to use the frozen dividends, converted into rubles, to pay its share of the decommissioning fund. In practice, the money that could not leave Russia will be reinvested directly in Russia, guaranteeing India's continuity of energy supplies and Moscow's operational stability for the project.

Who's Going and Who's Staying: Exxon's Exodus and Asian Resilience

The Sakhalin-1 affair is emblematic of the redrawing of the post-2022 global energy map.

• The US leaves: The project was operated by the American supermajor ExxonMobil (30%), which abandoned the field after the invasion of Ukraine, in a chaotic retreat that led Moscow to remove it from its role as operator.

• Asia remains: In contrast, Asian partners have chosen energy security. Vladimir Putin, with a decree last summer, reorganized the ownership structure, allowing the return of "friendly" or pragmatic foreign capital.

Here is the new configuration of foreign investors who have decided not to abandon ship:

Shareholder	Village	Share	Notes
ONGC Videsh	India	20%	Use frozen dividends for operating costs.
SODECO	Japan	30%	Consortium of Itochu, Marubeni and Japan Petroleum.

Interestingly, even Japan , a staunch ally of the United States, has maintained its position (through the SODECO consortium). The Tokyo government reiterated just last week that securing energy from foreign projects like Sakhalin is "extremely important" for national security. Pressure is useless when it comes to national energy security.

Conclusions

The operation demonstrates two things: first, that the "Global South" (including strategic Western partners like India and, to some extent, Japan) is unwilling to sacrifice its energy security on the altar of sanctions. Second, that the Russian financial system is adapting, creating closed loops in rubles that effectively soften the blockade of foreign capital. If the money can't leave, it will be spent internally.

Questions and Answers

Why couldn't India simply pay its share of the decommissioning fund?

The problem wasn't a lack of funds, but the inability to transfer them. Due to Western sanctions and banking restrictions, traditional channels for sending money to Russia were blocked. Paradoxically, India already had huge credits in Russia (unclaimed dividends), but couldn't use them freely until the Kremlin authorized the use of rubles for internal project obligations.

What happened to ExxonMobil's stake in the project?

ExxonMobil, which held a 30% stake and was the project's operator, decided to withdraw completely after the conflict in Ukraine broke out in 2022. In response, Vladimir Putin signed a decree seizing the project and transferring it to a new Russian entity. Exxon's stake was then absorbed and operational control changed hands, while the other foreign partners were allowed to return.

Why did Japan, a US ally, remain involved in a Russian project?

Japan has an extremely pragmatic approach based on the scarcity of natural resources. Tokyo has officially declared that projects like Sakhalin-1 are vital to national energy security.2 Abandoning the project would have meant losing billions of dollars in investments and having to seek alternative, and likely more expensive, sources of supply—a luxury the Japanese economy has decided it cannot afford.

The article "Sanctions in Check? India Uses 'Frozen' Dividends to Hold on to Russian Sakhalin-1 Oil" comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/scacco-alle-sanzioni-lindia-usa-i-dividendi-congelati-per-tenersi-il-petrolio-russo-di-sakhalin-1/ on Sat, 06 Dec 2025 20:25:18 +0000.