India not considering buying Russian oil in rupee: Minister

New Delhi, Mar 28 (PTI) India has no plans to pay in rupees for the Russian oil its public sector companies buy, Parliament was informed on Monday.

India buys less than one per cent of its total oil imports from Russia. But western sanctions against Russia for its invasion of Ukraine have given way to talk of a rupee trade for the oil and gas purchases. “At present, oil public sector undertakings neither have any contract nor is any such proposal under consideration from Russia or any other country for the purchase of crude oil in Indian rupees,” Minister of State for Petroleum and Natural Gas Rameswar Teli said in a written reply to the Rajya Sabha. He did not elaborate.

State-owned Indian Oil Corporation (IOC) has bought two parcels or shiploads of distressed Russian oil through traders at deep discounts. IOC bought 3 million barrels in each trade through European trader Vitol. Separately, Hindustan Petroleum Corporation Ltd (HPCL) bought two million barrels of Russian crude Urals through a trader.

Western sanctions on Russia over its invasion of Ukraine have prompted many companies and countries to shun its oil. This has led to Russian crude being available in the market at deep discounts. To capture the opportunity, Indian refiners are floating tenders to buy such discounted oil. The tenders are mostly won by traders, who would have stocked inventories of the cheap Russian oil.

Since 2020, IOC has had a term or fixed volume deal to buy crude oil from Russia’s Rosneft. But, it rarely imported volumes under the term deal as the cost of transporting the oil from Russia made it uneconomical. But, discounts of USD 20-25 per barrel have turned the tide in favour of Russian crude and Indian refiners are lapping it up, sources said. The refiners are buying Russian crude on a delivered basis to avoid any complications that sanctions may lead to in arranging shipping and insurance.

The sources said the trade with Russia is being settled through in dollars as the international payment mechanism has so far been kept out of the western sanctions ambit. Also, unlike the sanctions the US imposed on Iran over its controversial nuclear programme, oil and energy trade with Russia has not been banned. This essentially means that any country or company was free to buy oil and other energy commodities from Russia and use the international payment systems to settle the trade.

This wasn’t the case with Iran, which was cut off from the international money and security transfer system, SWIFT. Also, companies or entities investing or buying oil from Iran were sanctioned.

IOC had in February 2020 signed a deal with Rosneft Oil Company to import up to two million tonne of oil via the Black Sea port of Novorossiysk. In 2021, the deal envisaged supply of up to 1.7 million tonne of crude oil but IOC bought just one parcel or shipload as the cost of transporting the oil made it uneconomical. In December 2021, it renewed the deal to buy up to two million tonne of crude oil in 2022 from Rosneft.

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