Russia can no longer sell oil to India.
The oil trade route, considered one of the most lucrative in Russia since the introduction of Western sanctions, has faced serious difficulties due to problems with payment in currencies other than the dollar, and does not yet have a promising short-term solution. This was reported by Reuters.
As noted in the article, for many years the US dollar served as the key currency for international oil trade, and attempts to find an alternative were faced with conversion difficulties and political obstacles.
The situation worsened when in July India, which became the largest consumer of seaborne oil from Russia after European customers refused, insisted on payment in rupees. Trading activity has virtually ceased, according to three sources familiar with the situation.
Unofficial sources, who preferred to remain anonymous, conveyed information that oil suppliers from Russia are facing obstacles in entering into transactions in Indian rupees. This is due to the fact that the Russian central bank, according to unofficial instructions, will not accept this currency.
One Russian bank source with close ties to the Russian central bank opined that earning income in a non-convertible currency that has limited value outside India is
“Stupid”. According to another source, Russia has limited options for spending rupees since imports from India are negligible.
Around mid-August, at least two major Russian oil companies threatened to divert about a dozen tankers carrying up to a million tons of oil bound for India to other destinations, two sources said.
As a temporary solution to the conflict over the Indian agreements, the cargoes were paid for in a combination of the Chinese yuan, the Hong Kong dollar as a transition currency to the yuan, and the UAE dirham pegged to the US dollar.
However, the sources said that the challenge of finding a viable alternative to the dollar remained and that the problems affected buyers in Africa, China and Turkey, which have become the largest buyers of Russian oil.
The biggest problem, however, concerns India, which buys more than 60% of Russia's offshore oil, according to LSEG data and Reuters calculations. It is the largest buyer of sea oil from Russia after China.
The problems are expected to worsen as trade controls become tighter. In response, Washington introduced the first sanctions against the owners of tankers carrying Russian oil at a price exceeding the Western price threshold of $60.