In a dramatic turn of events, Russian oil tankers, originally bound for India, have begun to reroute amid ongoing payment disputes. These tankers, laden with Sokol oil, had been idling near the Indian and Sri Lankan coastlines for about a month. However, recent ship-tracking data from Bloomberg reveals a shift in their course, with five of these vessels now heading towards the Malacca Strait.
The situation remains tense, with the NS Century, another Russian tanker, still lingering near Sri Lanka’s shores. This ship’s fate hangs in the balance as Indian authorities deliberate over permitting the unloading of its cargo, as per Bloomberg’s earlier reports.
This shift in the tankers’ direction arises from complications in the payment process between Indian refiners and Russian oil suppliers. In a strategic move, Indian refiners have been making payments for Russian oil in dirhams, the currency of the United Arab Emirates. However, a hitch has emerged: a Rosneft unit, linked to one of Russia’s leading oil companies, faces challenges in opening a bank account in the UAE. Consequently, it’s unable to receive payments, according to sources familiar with the matter, as reported by Reuters.
The payment impasse has led to a backlog, with at least seven Russian oil shipments to India pending payment as of October, as initially reported by Reuters.
Adding to the complexity is the geopolitical angle. India finds itself in a delicate position, striving to maintain amicable relations with the US, which, in late 2023, sanctioned the NS Century for its involvement in trading oil with Russia above the imposed $60 per barrel price cap. These sanctions are part of Western efforts to squeeze Russia’s energy revenue, a significant source of funding for its ongoing conflict in Ukraine.
India’s role as a key purchaser of Russian oil has been underscored since the onset of the Ukraine invasion in 2022. Russia, redirecting its oil exports predominantly to China and India, has found a significant market in the latter. However, recent payment issues have led to a noticeable decline in Russian oil exports to India. December saw a stark drop, with Indian refiners not receiving any Sokol crude, highlighting the growing impact of these payment challenges on the oil trade dynamics between Russia and India.