India is the world’s third-largest consumer of oil, considering that 80% of its oil is imported from other countries. Recently, there has been a significant rise in the imports of Russian crude oil to India. Russia may not have been a significant supplier to India. India imported no crude from Russia in January or February of this year. But since March, there has been a significant rise in Russian oil exports to India.
According to tanker tracking data from May, says data analytics company Kpler, Russian oil sales are now India’s second-largest source of oil imports after imports from Iraq. Moscow replaced Saudi Arabia as India’s main oil importer.
According to the sources and a document, Russia is asking for payment in United Arab Emirates dirhams for oil supplies to some Indian customers as Moscow moves away from the U.S. dollar to protect itself from the impact of Western sanctions.
The United States and its allies have imposed several sanctions on Russia as a result of its invasion of Ukraine in late February, which Moscow refers to as a “special military operation.” Sanctions imposed by the West on Russia resulted in a boycott of Moscow, resulting in massive discounts in market pricing for Russian oil relative to other categories.
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According to the Reuters report, the bill for the supply of oil was calculated in dollars but the payment was requested in dirhams.
Russia’s largest oil producer, Rosneft, is supplying crude to India, its second-largest oil consumer after China, through trading companies like Everest Energy and Coral Energy.
Because of high import prices, Indian refiners, which rarely bought Russian oil, now had the opportunity to buy exports at significant discounts to Brent and other Middle Eastern commodities. According to the sources, at least two Indian refiners have already cleared some payments in UAE dirhams, and more are expected to do so in the upcoming days.
Payments were to be transferred to Gazprombank through Mashreq Bank, its correspondent bank in Dubai, according to the invoice.
Why does India purchase Russian crude?
Due to the western sanctions against Russia and the occupation of Crimea, there were fewer foreign governments and companies interested in purchasing Russian energy exports, which resulted in a decline in the price of Ural crude oil. India increased its oil imports from Russia during a period of rising energy prices by taking advantage of cheap prices.
Amos Hochstein, a representative of the US State Department, claimed to have warned Indian officials not to “appear to be taking advantage of the pain that is being felt in European households and the US.”
The official said that efforts were being made to establish a rupee-rouble trade system to ease transactions because of worries that money transfer lines would be blocked as a result of Western sanctions on Moscow, including those on banks.
According to foreign minister S. Jaishankar, Western nations have “squeezed every other source of oil we have” as a result of sanctions placed on other significant oil producers like Iran and Venezuela. India has also rejected recent claims that it exported refined Russian crude to the US and other nations after importing it.
What does Russia want to achieve with this?
According to Sergi Lavrov, Russia’s foreign minister, the country aims to use non-Western currencies more often in its dealings with nations like India and the UAE. The sources claimed that as of the beginning of this month, the trading companies Rosneft uses have begun demanding the dirham equivalent of the payment made in dollars.
The country’s finance minister previously stated that Moscow may begin purchasing the currencies of “friendly” nations, using these purchases to affect the value of the dollar and the euro to manage the rouble’s sharp appreciation.
UAE is one of the countries that have kept its nuclear stance so far in the Ukraine conflict and has refused to impose sanctions on Russia. The financial and commercial hub of the Gulf, Dubai, has become a shelter for Russian money. These Dirhams payments could trigger Western resentment against the Russian-friendly countries.
On the other hand, to facilitate trade, India, which also maintains a neutral stance, has granted classification to ships operated by a Dubai-based subsidiary of Moscow’s leading maritime business. The Indian central bank is discussing a solution to international trade settlements in rupees to promote trade with sanctioned countries.