Indian refiners pay for Russian crude in dirhams, fearing dollar settlement trouble!

by Ana Lopez

NEW DELHI: Indian refiners have asked the US for most of the Russian oil bought by Dubai-based traders. It has started paying in United Arab Emirates dirhams instead of dollars, said four sources with knowledge of the matter.
While India has not recognized Western sanctions against Moscow and purchases of Russian crude oil cannot in any case violate them, banks and financial institutions are wary of clearing payments so as not to fall foul of many of the measures imposed against Russia after its invasion of Ukraine. go
Indian refiners and traders are concerned that they may not be able to continue to settle trades in dollars, especially if the price of Russian crude rises above the limits imposed by the Group of Seven and Australia in December.
That has forced merchants to find alternative payment methods, which could also help Russia’s efforts to de-dollarize its economy in response to Western sanctions.
Previous attempts by Indian refiners to pay traders for Russian crude in dirhams through Dubai banks had failed, forcing them to revert to the US currency.
But India’s top bank, State Bank of India (SBI), is now clearing these dirham payments, sources told Reuters, providing details of the transactions not previously reported.
SBI, which has branches abroad, including in the United States, did not respond to requests for comment. The G-Seven price cap prohibits any Western company, such as insurance and shipping service providers that underpin much of the global trade, from engaging in trade in Russian crude if the purchase price at the loading point in Russia is above 60 per barrel. That remains the case even if oil is bound for countries that do not recognize the cap, such as China and India.
The shift to dirham payments was also triggered by an inquiry by the SBI to give a break in oil, freight and insurance costs to refiners seeking to pay in dollars for Russian crude, allowing it to monitor trade and avoid violating limits.
India does not follow the price cap mechanism and Western insurance and shipping are not used for delivery, one of the sources said. Indian refiners typically buy Russian crude from traders at prices that include delivery to India. In invoices for such deals seen by Reuters, traders demanded average crude prices, including freight for Urals crude. The document calculated the value of the cargo in dollars and dirhams.
Four sources said Indian refiners are buying Russian oil on a delivery basis to minimize any risks that may arise during shipping, and so far the calculated price at the time of loading is subject to a price cap.
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Indian refiners buy Russian crude mostly from Dubai-based traders including Everest Energy and Litasco, a unit of Russian oil major Lukoil. India’s Oil Secretary Pankaj Jain said last month that Indian companies are not facing any problem in paying for Russian oil as recent actions by Western countries do not affect the trade settlement mechanism.

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