Abu Dhabi: India’s oil refiners are making payments in United Arab Emirates Dirhams instead of Dollars, according to a report by the news agency Reuters.
The report cites four sources with knowledge of the matter saying that the State Bank of India (SBI), is now clearing these dirham payments.
Following the Russian Invasion of Ukraine, Western countries have put multiple sanctions on Russia, including a price cap on oil purchases. India has resisted the sanctions and has subsequently increased its Russian crude oil imports.
However, Banks and financial institutions are cautious about clearing payments so as not to unintentionally violate the numerous sanctions imposed against Russia even though India does not recognise Western sanctions against Moscow, the report said.
In particular, if the price of Russian crude increases above the price cap imposed by the Group of Seven nations (G7) and Australia in December last year, Indian refiners and dealers are concerned they may not be able to continue to settle trades in dollars.
The G7 price cap forbids any Western business from engaging in the trading of Russian oil if the purchase price is greater than $60 per barrel at the loading point in Russia.
According to the report, due to this, traders are looking for alternate payment methods, which may also help Russia in its efforts to de-dollarize its economy in reaction to Western sanctions.
Indian refiners had previously tried to pay traders for Russian crude in dirhams through Dubai banks, but those attempts had failed, forcing them to return to using dollars, the report added.
SBI has asked the refiners to provide a breakdown of the costs of the oil, freight, and insurance, allowing it to vet trade and avoid violating the cap, the report said.
“The SBI is very conservative in its approach,” one of the sources told Reuters adding that even though India does not follow the price cap mechanism and Western insurance and shipping are not used for delivery. Indian refiners are buying Russian crude from traders at a price that includes delivery to India as well.
