Indian refiners have made a significant change in their mode of payment for the Russian oil they purchase via Dubai-based traders. Instead of paying in US dollars, they are now paying in United Arab Emirates dirhams, according to sources familiar with the matter.
Although Western sanctions against Russia are not recognized by India and the purchase of Russian oil may not violate them, banks and financial institutions are wary of clearing payments for fear of falling afoul of the measures imposed against Russia due to its invasion of Ukraine.
🇮🇳 Refiners Circumvent Russian Oil Sanctions With Dirhams
Concerned over the future of trading in US Dollars, especially if Russian crude rises above the price cap, Indian Refiners are using UAE’s currency and mostly conducting the trade through Dubai based traders. pic.twitter.com/0eqKnZCpte
— RT_India (@RT_India_news) February 4, 2023
Concerns about the ability to continue settling trades in dollars have arisen, especially if the price of Russian crude rises above the cap imposed by the Group of Seven nations and Australia in December. As a result, traders are seeking alternative methods of payment, which could also aid 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 failed, leading to a switch back to the US currency. However, India’s top bank, the State Bank of India (SBI), is now clearing these dirham payments, according to the sources. The details of these transactions have not been reported previously.
The SBI, which has branches overseas including in the United States, did not respond to requests for comment.
The G7 price cap prohibits any Western company, such as insurance and shipping service providers that support much of global trade, from participating in trading Russian crude if the purchase price is above $60 a barrel at the loading point in Russia. This remains the case even if the oil is destined for countries like China and India, which do not recognize the cap.
In conclusion, Indian refiners’ switch to dirhams for payments of Russian oil reflects the impact of Western sanctions against Russia and the efforts of traders to seek alternative methods of payment. The role of the State Bank of India in clearing these payments is significant.
