new Delhi: India has no plans to pay in rupees for Russian oil to be bought by public sector companies, Parliament was informed on Monday.
India buys less than one percent of its total oil imports from Russia. But Western sanctions against Russia for its invasion of Ukraine have led to talks of rupee trading for oil and gas purchases.
Rameshwar Teli, Minister of State for Petroleum and Natural Gas, said in a writing, “At present, there is neither any contract with the Oil Public Sector Undertakings nor any such proposal for purchase of crude oil in Indian Rupees from Russia or any other country. are taken into account.” Reply to Rajya Sabha. He did not elaborate.
State-owned Indian Oil Corporation (IOC) has bought two parcels or shiploads of troubled Russian oil through traders at huge discounts. The IOC bought 3 million barrels in each trade through European trader Vitol.
Separately, Hindustan Petroleum Corporation Limited (HPCL) bought two million barrels of Russian crude Urals through a trader.
Western sanctions over Russia’s invasion of Ukraine have prompted many companies and countries to stay away from its oil. it has led to
Russian crude is becoming available in the market at huge discounts.
To take advantage of this opportunity, Indian refiners are issuing tenders to buy such subsidized oil. Tenders are mostly won by traders who would have stockpiled cheap Russian oil.
From 2020, IOC has entered into a term or fixed volume deal to buy crude oil from Rosneft of Russia. However, it rarely imported volumes under the term deal as the cost of transporting oil from Russia made it unviable.
But, a discount of $20-25 a barrel has turned in favor of Russian crude and Indian refiners are reducing it, sources said.
Refiners are procuring Russian crude on a distributed basis to avoid any complications arising out of restrictions in shipping and insurance arrangements.
Sources said trade with Russia is being settled in dollars as the international payment mechanism has so far been kept out of the purview of Western sanctions.
Also, unlike sanctions imposed by the US on Iran over its controversial nuclear program, oil and energy trade with Russia has not been banned.
This essentially meant that any country or company was free to buy oil and other energy commodities from Russia and use international payment systems to settle trade.
This was not the case with Iran, which was cut off from the international money and security transfer system, SWIFT. Also, companies or entities investing in or buying oil from Iran were banned.
The IOC signed an agreement with Rosneft Oil Company in February 2020 to import two million tonnes of oil through the Black Sea port of Novorossiysk.
In 2021, the deal envisages a supply of 1.7 million tonnes of crude, but the IOC bought just one parcel or shipload because the cost of transporting the oil made it unviable.
In December 2021, it renewed a deal to buy 2 million tonnes of crude oil from Rosneft in 2022.