Some Indian banks have started to consider financing Russian oil trades that involve only non-sanctioned entities and sanctions-compliant pricing and payments, Bloomberg reported on Tuesday, citing sources with knowledge of the development.
India is steering clear of Russian oil now as the U.S. sanctions on Russia’s top producers and exporters, Rosneft and Lukoil, make Indian refiners wary of handling Russian barrels.
Before the latest sanctions on Russian oil trade, India bought from Russia around one third of all the crude it imported, as it sought cheaper oil.
Amid tense trade negotiations with the United States, India earlier this year was singled out by U.S. President Donald Trump as the main financier of the Kremlin’s oil revenues. At the time, India remained adamant that it would buy the cheapest oil available regardless if it comes from Russia or elsewhere.
However, the U.S. sanctions on Rosneft and Lukoil upended all previous plans of Indian refiners who hastened to withdraw from the spot market of Russian crude for December.
All but two Indian refiners have skipped placing orders for Russian crude for next month, apparently not willing to test how serious the U.S. Treasury would be with potential secondary sanctions.
Now banks in India are willing to explore financing trade with non-sanctioned Russian crude, according to Bloomberg’s sources. These Indian banks have drafted a compliance mechanism to service requests for payment from refiners. These payments could be processed in UAE dirhams or Chinese yuan, the sources say.
Banks and refiners in India have also intensified scrutiny over any potential trade or transaction to verify that only non-sanctioned entities, vessels, traders, and insurers are involved.
This could be a very difficult verification process, considering the three years in which the Russian trade continued via various mechanisms to avoid scrutiny and evade sanctions. Moreover, Indian refiners and banks are unlikely to risk losing access to the U.S. financial system if they are found in breach of the sanctions.
By Tsvetana Paraskova for Oilprice.com
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