Payment issues have caused delays in shipments of Russian Sokol crude oil to India, forcing Indian Oil Corp (IOC) to purchase more oil from the Middle East, Reuters reported Dec. 26, citing sources close to the matter.
IOC is India's largest refinery, and the only state-owned refinery with an annual contract to buy varieties of Russian grades, including Sokol, from the Russian oil giant Rosneft.
According to shipping data, IOC was set to receive six shipments of Sokol from late November to December, but those cargoes were not delivered. One of the tankers, the NS Century, was sanctioned by the U.S. on Nov. 16.
While the NS Century is bound for Singapore, the other shipments remain floating off the coasts of India and Sri Lanka.
"The supplier has an intent to deliver crude oil. Hopefully a solution will be found soon," one source told Reuters.
IOC has been paying for Russian oil supplies with dirhams, the currency of the United Arab Emirates, since the Indian government advised all its state-owned refineries to switch from Chinese yuan to dirhams.
Sources told Reuters that IOC's payments were delayed because Sakhalin-1 LLC, the Rosneft entity that supplies Sokol oil to IOC, has not been able to open a bank account in the UAE that can accept dirham payments.
India has become a critical market for Russian oil amid intensifying Western sanctions. It is now the largest buyer of Russian seaborne crude, though sanctions present logistial difficulties in coordinating shipments.
According to Reuters, India's oil ministry told a parliamentary panel in December that state oil companies have difficulties paying for Russian oil supplies because some banks cannot process payments for Russian oil in U.S. dollars.
The ministry also told the panel that India was complying with the G7's price cap of $60 per barrel for seaborne Russian oil.