Indian banks are now willing to consider financing trade in Russian oil if it is sourced from non-blacklisted sellers and transactions are sanctions-compliant, indicating that the country’s biggest energy supplier of the last four years may retain a toehold in India’s import mix.
That’s a shift from a few weeks ago — before the latest US curbs, which took effect on Friday — when lenders were wary of clearing payments for any Russian cargoes, citing difficulties in verifying the supply chain, Bloomberg reported quoting unnamed sources.
India had found itself collateral damage in President Donald Trump’s bid to tighten the screws on Moscow to end war in Ukraine, facing a punitive 50 per cent tariff on roughly two-thirds of its exports to the US because of its sourcing of Russian barrels.
Bank’s willingness to fund comes at a time when the Indian government is looking for a reprieve from high tariffs from the US on the basis of its massive projected cut in Russian oil sourcing. There is an expectation that 25 per cent penalty duty would be revoked at the least, if there is demonstrative reduction in purchase.
India has been the second largest customer for Russian crude after China, although local refiners have been able to source alternative, pricier barrels post sanction from West Asia, North Africa and Latin America due to abundant supply in the global market.
Banks have worked out a compliance mechanism to service payment requests from refiners for Russian barrels, the people said. Among them, transactions could be processed in United Arab Emirates’ dirhams and Chinese yuan.
Indian lenders and refiners are also intensifying verification, checking where oil is produced, as well as examining vessels used for transit, the people said. The moves involve looking at vessel histories, including whether they were involved in ship-to-ship transfers linked to any blacklisted entity, the people added.
Most Indian refiners had skipped placing orders for Russian crude for December delivery, following US sanctions on key producers Rosneft and Lukoil who account for about 52 per cent Russian production.
It added to curbs on Gazprom Neft PJSC and Surgutneftegas PJSC. Together, the moves dealt a blow to a trade that has flourished since Russia’s 2022 invasion of Ukraine as India became Moscow’s largest seaborne crude customer.
Given the curbs, the discount on Russia’s flagship Ural grade has widened to about $7 a barrel to the Dated Brent benchmark. This has increased the incentive for price-sensitive local refiners to explore options on acquiring cheaper oil. The discount was about $3 before the latest sanctions.
To be sure, refiners remain wary that any cargo linked to sanctioned firms could cause a freeze in payments and expose them to costly arbitration or secondary sanctions, the people said. While stricter checks may delay bookings, they’re expected to keep at least some Russian flows alive.