Payment in Chinese currency of seven cargoes of Russian crude oil imported by state-run Indian oil refineries is being held up over the Indian government’s new-found hesitancy to accept this form of payment, Reuters cited unnamed Finance Ministry sources as saying on Monday.
While there has been some delay in payment with some cargoes, Russian oil companies continue to supply Indian refiners, with India this year becoming the biggest importer of Russian seaborne crude at discounted prices. In July, some refiners began paying for Russian oil imports in Chinese yuan, at the insistence of Russian sellers.
According to the Times of India, state-run Indian Oil COrp. has settled purchases in yuan previously, while Bharat Petroleum Corp and Hindustan Petroleum have not yet resorted to the Chinese currency, though direct Russian suppliers have requested this.
The Indian government has stated that it has not explicitly prohibited payment in yuan, but is neither encouraging nor facilitating it.
Private Indian refiners have continued to settle accounts for Russian oil imports in yuan, though the Times of India notes that the majority of purchases are being settled in UAE dirhams, as yuan payments result in additional conversion costs, adding 2-3% to the cost.
India imported some 1.55 million barrels per day (bpd) of Russian oil in September, up by 16% compared to August.
India’s allegedly growing discomfort over settling purchases of Russian oil in yuan comes as the U.S. Treasury Department announces sanctions on two companies for violating the $60 price cap on Russian oil. Earlier this week, sanctions were slapped on two vessels owned by companies based in the UAE and Turkey.
A UAE vessel carried Russian-origin crude priced at more than $75 a barrel, according to the Treasury Department, while a Turkish company facilitated the transport of Russian crude priced above $80 per barrel. Both tankers used U.S.-based service providers while transporting the oil of Russian origin, the Treasury Department said.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com