Indian refiners pay traders in UAE dirhams for Russian oil

Indian refiners have started using the United Arab Emirates (UAE) dirhams instead of United States dollars (USD) to purchase Russian oil, according to a report by Reuters.

Indian refiners and traders paid for Russian oil purchased via Dubai-based traders in dirhams because they were concerned that they would not be able to continue to settle trades in US dollars. Indian refiners expressed concern when the Group of Seven (G7) nations and Australia agreed on the price cap of $60 on Russian seaborne crude oil. The price cap prohibits western companies from involvement in trading Russian crude if the purchase price is above $60 a barrel at the loading point in Russia.

Reportedly, Indian refiners fear that they will be unable to purchase oil via USD if the price of Russian crude rises above a cap imposed by the G7 nations and Australia in December. They are concerned that the Russian-Ukraine conflict and US sanctions on Russian crude oil might cause problems trading the oil in US dollars.

The United States and European Union officials tried to convince India, China and Turkey to join the coalition and support the price cap. However, the sanctions against Russia are not recognised by India and Indian refiners can purchase Russian crude oil. Currently, the purchase of Russian oil does not violate any sanctions. Reportedly, Banks and financial institutions in India are cautious about clearing payments in order to not unintentionally violate the numerous sanctions imposed against Russia.

The State Bank of India (SBI), an Indian multinational public sector bank, is now clearing dirham payments. The SBI has also asked the refiners to provide a breakdown of the costs of the crude oil in order to avoid violating the cap.

The shift from USD to dirham payments has helped Indian refiners. They usually buy Russian crude from traders at a price that includes delivery to India. They buy Russian crude oil from Dubai-based traders, including Everest Energy and Litasco.