New Delhi: of India Bank of Baroda It has stopped paying for Russian oil sold above a price cap set by the West this month, three sources with direct knowledge of the matter said, a move that could hasten the rupee’s transition to a trading mechanism.
Sources said some Indian refiners were paying in UAE dirham currency for Russian low-sulphur crude priced above the $60 a barrel cap, mainly using Bank of Baroda to Dubai-based traders.
The Group of Seven economies, the European Union and Australia set price limits late last year to prevent Western services and shipping from trading Russian oil unless at a lower price applied to deprive Moscow of funds for it. Not sold ukraine war,
One of the sources said, “Bank of Baroda is extremely cautious in settling payments for Russian oil bought above (at levels) the price cap.”
“They haven’t asked us to settle payment for the above-cap barrels,” the person said.
Three sources said the state-run lender told refiners last month it would not settle payments from Russian barrels bought above the price cap.
Bank of Baroda did not respond to requests for comment from Reuters.
Before the Ukraine war, Indian refiners rarely bought oil from Russia because of the high cost of freight. Following Western sanctions on Moscow for its invasion of Ukraine, Indian refiners are pushing for concessional Russian oil.
Data from trade sources show that Russia has replaced Iraq as the top oil supplier to India in the last few months.
Russian sweet crudes such as Sokol and ESPO Blend, which have sold near $60 a barrel in recent weeks, are expected to slide after a sharp jump in global oil prices from Sunday’s OPEC+ decision to cut production, sources said. Reasons may exceed the price cap.
Sources told Reuters last month that some refiners, mainly private operators, are paying in dirhams for Russian crude through private lender Axis Bank. It was not clear whether Axis Bank had also closed contracts in Russian oil sold above the price limit.
Axis Bank did not immediately respond to a Reuters request for comment.
Although Indian refiners buy Russian oil on a delivered basis, copies of invoices reviewed by Reuters also show shipping charges, which help calculate the price of crude at Russian ports.
Sources said problems in settling trades for Russian oil may prompt sellers to accept rupee payments, at least for barrels that exceed the price ceiling.
Another source said, “We have neither stopped nor reduced the purchase of Russian oil after the Bank of Baroda decision… We will consider using the rupee to pay for the oil purchased above the price ceiling. Will consider.”
A senior oil ministry source said last month that India does not recognize the western price cap on Russian oil.
settlement mechanism
India last year set up a mechanism to settle its international trade in rupees. Some Russian banks later opened vostro accounts with banks in India to facilitate rupee trading.
The mechanism is yet to kick in given the lack of Russian appetite for the rupee and India’s trade deficit with Moscow.
However, during a visit to India last week, Igor Sechin, CEO of the Russian oil major rosneftDiscussed ways to expand cooperation with India across the hydrocarbon value chain, including the possibility of making payments in national currencies.
Switching to rupee payments will help Russia get rid of dollars and save foreign exchange for India.
Sources said some Indian refiners were paying in UAE dirham currency for Russian low-sulphur crude priced above the $60 a barrel cap, mainly using Bank of Baroda to Dubai-based traders.
The Group of Seven economies, the European Union and Australia set price limits late last year to prevent Western services and shipping from trading Russian oil unless at a lower price applied to deprive Moscow of funds for it. Not sold ukraine war,
One of the sources said, “Bank of Baroda is extremely cautious in settling payments for Russian oil bought above (at levels) the price cap.”
“They haven’t asked us to settle payment for the above-cap barrels,” the person said.
Three sources said the state-run lender told refiners last month it would not settle payments from Russian barrels bought above the price cap.
Bank of Baroda did not respond to requests for comment from Reuters.
Before the Ukraine war, Indian refiners rarely bought oil from Russia because of the high cost of freight. Following Western sanctions on Moscow for its invasion of Ukraine, Indian refiners are pushing for concessional Russian oil.
Data from trade sources show that Russia has replaced Iraq as the top oil supplier to India in the last few months.
Russian sweet crudes such as Sokol and ESPO Blend, which have sold near $60 a barrel in recent weeks, are expected to slide after a sharp jump in global oil prices from Sunday’s OPEC+ decision to cut production, sources said. Reasons may exceed the price cap.
Sources told Reuters last month that some refiners, mainly private operators, are paying in dirhams for Russian crude through private lender Axis Bank. It was not clear whether Axis Bank had also closed contracts in Russian oil sold above the price limit.
Axis Bank did not immediately respond to a Reuters request for comment.
Although Indian refiners buy Russian oil on a delivered basis, copies of invoices reviewed by Reuters also show shipping charges, which help calculate the price of crude at Russian ports.
Sources said problems in settling trades for Russian oil may prompt sellers to accept rupee payments, at least for barrels that exceed the price ceiling.
Another source said, “We have neither stopped nor reduced the purchase of Russian oil after the Bank of Baroda decision… We will consider using the rupee to pay for the oil purchased above the price ceiling. Will consider.”
A senior oil ministry source said last month that India does not recognize the western price cap on Russian oil.
settlement mechanism
India last year set up a mechanism to settle its international trade in rupees. Some Russian banks later opened vostro accounts with banks in India to facilitate rupee trading.
The mechanism is yet to kick in given the lack of Russian appetite for the rupee and India’s trade deficit with Moscow.
However, during a visit to India last week, Igor Sechin, CEO of the Russian oil major rosneftDiscussed ways to expand cooperation with India across the hydrocarbon value chain, including the possibility of making payments in national currencies.
Switching to rupee payments will help Russia get rid of dollars and save foreign exchange for India.