Beyond Oil: How bioenergy investments can rebalance India-Russia trade

India's economic relationship with Russia is often described as one of the most resilient strategic partnerships in the world. Yet in spite of the strength of diplomatic ties there is a widening trade deficit that has become one of the largest bilateral imbalances in India's external trade portfolio. The challenge before policymakers today is not merely to sustain trade growth but to make it more diversified, balanced, and future-oriented. One promising avenue is bioenergy collaboration through bilateral investments.

The numbers tell a striking story. India-Russia bilateral trade has surged from about $13 billion in 2021 to nearly $68-69 billion in FY2024-25, driven overwhelmingly by India's purchases of discounted Russian crude oil. However, India's exports to Russia have remained below $5 billion, resulting in a trade deficit approaching $59 billion.

This imbalance emerged after the Ukraine conflict reshaped global energy flows. Russia became India's largest supplier of crude oil, accounting for nearly 40% of India's imports at various points during 2024 and 2025. India's crude imports from Russia alone exceeded $46 billion in FY2023-24, helping India save billions in fuel costs and contain inflation.


While these imports have strengthened India's energy security, they have also created structural vulnerabilities. Russia now exports more than $60 billion worth of goods annually to India, primarily crude oil, petroleum products, coal, and fertilisers, while Indian exports remain concentrated in pharmaceuticals, engineering goods, machinery, and agricultural products.

To navigate the vulnerability in an interconnected world, the two countries must expand cooperation into new sectors that generate investment, manufacturing, technology transfer, and long-term value creation. Bioenergy offers exactly such an opportunity.

Why bioenergy matters

India has emerged as one of the world's fastest-growing bioenergy markets. The International Energy Agency estimates that India will account for more than one-third of global bioenergy demand growth through 2030. The country has already established ambitious targets, including 20% ethanol blending, 5% biodiesel blending, mandatory compressed biogas (CBG) blending, biomass co-firing in thermal power plants, and sustainable aviation fuel deployment and introduction of Flex fuel vehicles operating on E85 fuel.

These targets create enormous demand for feedstock, technology, and investment. India possesses abundant agricultural residues, livestock waste, municipal solid waste, and sugar industry by-products. Yet large-scale deployment requires capital, advanced conversion technologies, logistics infrastructure, and international partnerships.

Russia, meanwhile, possesses vast agricultural land, forestry resources, biomass availability, scientific expertise, and energy engineering capabilities. Although Russia's energy diplomacy has traditionally focused on oil, gas, and nuclear power, diversification into renewable fuels aligns with Moscow's broader goal of expanding economic cooperation beyond hydrocarbons. Recent bilateral discussions have continued to emphasize energy diversification, innovation, and investment cooperation.

Existing policy frameworks could facilitate cooperation

A key advantage is that India and Russia need not start from scratch. Several policy frameworks already exist. First, both countries have adopted long-term economic cooperation roadmaps extending to 2030, with a bilateral trade target of $100 billion. These frameworks emphasize investments, industrial partnerships, logistics connectivity, and technology collaboration.

Second, negotiations involving India and the Eurasian Economic Union (EAEU), led by Russia, have advanced toward a free trade arrangement. A future agreement could significantly reduce tariff and non-tariff barriers for biofuel equipment, biomass processing technologies, enzymes, industrial machinery, and agricultural products.

Third, the growing use of national currencies in bilateral trade creates an additional opportunity. One of the persistent concerns in India-Russia trade has been the accumulation of Russian-held rupees due to the trade imbalance. Investing these rupee balances into bioenergy projects within India could transform a payment challenge into a productive investment channel.

The bilateral investment model

A practical model would involve Russian sovereign funds, energy companies, and fertiliser firms investing directly in India's bioenergy ecosystem.

This could include investments in compressed biogas (CBG) plants using agricultural residues, second-generation ethanol facilities based on crop waste, biomass pellet manufacturing units, sustainable aviation fuel projects, and urban waste-to-energy installations. Opportunities could also extend to biomethane and green fuel distribution infrastructure, along with the manufacturing and supply of capital equipment required for these projects.

Such investments would create domestic jobs, increase domestic technology supply chains for the Bioenergy sector, help augment existing capacities, introduce new facilities, reduce stubble burning, improve rural incomes, and lower India's fossil fuel import dependence.

At the same time, Russian investors would gain long-term exposure to one of the world's most rapidly expanding renewable fuel markets. This would represent a strategic shift from a buyer-seller relationship toward a production-investment partnership.

Fertilisers and bioenergy: A natural link

Another major area of cooperation lies at the intersection of fertilisers and bioenergy.

Russia is already a crucial supplier of fertilisers to India. Modern biogas and biomethane plants generate organic digestate, which can supplement chemical fertilisers and help improve soil health. Integrating Russian fertiliser expertise with Indian biogas expansion could produce a circular agricultural economy model that benefits both countries.

Joint ventures combining biogas production, bio-fertilisers, and carbon-credit generation could be particularly attractive under emerging global climate-finance frameworks.

Russia can also serve as a large market for use of biofertilisers and provide a large, consistent offtake ensuring operational viability.

Logistics corridors could boost green trade

India and Russia are simultaneously developing strategic connectivity projects, including the International North-South Transport Corridor (INSTC), the Chennai-Vladivostok Maritime Corridor, and Arctic shipping routes. These logistics corridors are generally discussed in the context of oil and commodities, but they could equally support biomass equipment, renewable-energy components, and biofuel trade.

Improved connectivity would lower transportation costs and encourage deeper industrial integration between the two economies.

Some hurdles need joint navigation

Despite the potential, there may be hurdles that may need joint navigation. Restrictions on Russian entities continue to have uncertainty for financing and technology partnerships. Regulatory standards for biofuels differ across jurisdictions. Moreover, both governments remain heavily focused on hydrocarbons because oil continues to dominate bilateral trade revenues.

There is also the question of commercial viability. Bioenergy projects require stable feedstock supply chains, long-term policy certainty, predictable pricing mechanisms and progressive approach to improving output quality and robust and effective standards. Without these conditions, investors will remain cautious irrespective of diplomatic enthusiasm.

“Building a common standardization framework between India and Russia for fuel quality and feedstock quality can be a stepping stone to build confidence in the bilateral bioenergy eco-system” opines Nishant Sarna, a bioenergy expert with more than decade of experience in this sector. This eco-system can be another success story and step in energy supply resilience.

The author is Deputy Director General, All India Distillers’ Association (AIDA)