Indian companies are still buying Russian oil in dollars after Dubai’s Mashreq Bank refused to handle payments from at least two refiners in Emirati dirhams as requested by the supplier, according to three sources familiar with the matter.
Russia has been hit with sanctions from the United States and its allies following its invasion of Ukraine, and Moscow has asked some buyers of its products to pay in rubles or other currencies than the dollar and the euro in which its contracts are generally priced.
Traders supplying Russian oil in July had asked at least two Indian companies to settle in dirhams. An invoice from one of the refiners seen by Reuters showed oil payments were calculated in dollars while payment was requested in dirhams.
The invoice stated that payments were to be made to Gazprombank through Mashreq Bank, its correspondent bank in Dubai. Mashreq has a branch in New York, according to its website.
The three sources said the dirham payments were unsuccessful because the Mashreq refused to facilitate the trade. Reuters was unable to establish why.
The US Treasury, Mashreq Bank and Gazprombank did not immediately respond to requests for comment.
One of the sources said the payments were eventually processed by the Abu Dhabi branch of the State Bank of India and settled in US dollars.
The State Bank of India did not respond to an email from Reuters seeking comment.
The United Arab Emirates and India have avoided harsh criticism of Russia’s actions in Ukraine, which Moscow calls a “special military operation”, and have not imposed sanctions.
India’s central bank recently introduced a mechanism to facilitate international trade in rupees, a move seen as easing trade relations with Russia in the event of tougher Western sanctions on Moscow.
The new rules largely mirror the barter-like system used with Iran during its sanction, where Indian importers deposited payments in rupees into the “vostro” account of Tehran’s commercial banks at India’s UCO bank, a public lender.
A Vostro account is one that a local correspondent bank holds on behalf of a foreign bank.
Iran used the funds to pay for imports of unsanctioned goods from India.
UCO Bank has won approval from India’s central bank to open a special rupee account for Russia’s Gazprombank, and its chief executive Soma Sankara Prasad told Reuters he hopes to do so soon.
For settlement under the new mechanism, importers and exporters must agree to invoice in rupees and settle the terms of the exchange rate.
To make local currency trading more attractive, India has also allowed foreign banks to invest their excess funds in government securities, as rupee special accounts offer no interest on deposits.
According to government data, India’s imports from Russia hit $17.24 billion in April-August this fiscal, up from around $3.2 billion a year earlier due to a surge in purchases. of petroleum.
Western sanctions have prompted many oil importers to avoid Moscow, pushing Russian crude spot prices to record discounts relative to other grades.
This provided Indian refiners, who rarely bought Russian oil due to high transportation costs, an opportunity to export at very favorable prices to Brent and Middle Eastern commodities.
Source: Reuters (Reporting by Nidhi Verma, Additional reporting by Timothy Gardner in Washington, Nupur Anand in Mumbai, Yousef Saba in Dubai; Editing by Mike Collett-White and Kirsten Donovan)