Russia’s oil trade with India, one of its most important buyers, faces a major obstacle due to payments in currency other than the U.S. dollar, Reuters reported on Nov. 27, citing undisclosed sources.
In response to Western sanctions, Russia has shifted away from transactions in dollars, the world’s leading currency for oil payments.
Problems arose in July when India reportedly insisted on paying for Russian oil in its national currency, the rupee. The deal then nearly fell apart as Russian oil suppliers rejected to accept the currency “because of informal guidance from the Russian central bank,” Reuters wrote.
Receiving revenue in rupees would have little value outside India, a Russian banking source told the news agency.
After at least two major Russian companies reportedly threatened in August to divert around a dozen tankers from India to other destinations, the parties agreed to pay for the cargo through other intermediary currencies.
A lack of a viable alternative to the dollar remains a serious problem for Russia, affecting its oil trade with buyers in Africa, China, and Turkey, Reuters said.
Moscow has been turning to these markets as the West is weaning itself off Russian oil in response to the invasion of Ukraine.
India plays an especially important role among these states, as it has been buying more than 60% of Russia’s seaborne oil, making it the second buyer of Russian seaborne crude after China, Reuters wrote.
Overall trade between Russia and India in the first eight months of 2023 more than doubled from the previous year, reaching a record high of almost $44 billion, Russian state-run media RIA Novosti claimed on Oct. 23.