Informed sources told Reuters that Indian refining companies have begun to pay the price of most of the Russian oil that they buy through trading companies based in Dubai, in Emirati dirhams instead of US dollars.
While India does not recognize Western sanctions imposed on Moscow, and its purchases of Russian oil may not violate them anyway, banks and financial institutions are careful about settling payments so as not to inadvertently fall under the many measures imposed on Russia for its war in Ukraine.
Indian traders and refiners are concerned about the inability to continue settling transactions in dollars, especially if the price of Russian crude rises above a ceiling imposed by the Group of Seven nations and Australia in December.
This prompted them to search for alternative payment methods that could also help Russia in its efforts to de-dollarize its economy in response to Western sanctions.
Previous attempts by Indian refiners to pay trading companies for Russian crude oil in dirhams through Dubai banks failed, forcing them to revert back to the US currency.
But the sources told Reuters that the State Bank of India - the country's largest - is now clearing the payments in dirhams, and provided details of previously undisclosed transactions.
The Indian bank, which has branches abroad, including in the United States, did not respond to requests for comment.
India does not recognize a price ceiling
A G7 price cap prohibits any Western company, such as the insurance and shipping providers that support much of the world's trade, from participating in the Russian crude oil trade if the purchase price is above $60 a barrel at the point of loading in Russia.
This remains the case even if the oil is destined for countries - such as China and India - that do not recognize this ceiling.
The shift to payments in dirhams also came about because the State Bank of India required refiners seeking to make payments in dollars to provide details of oil, freight and insurance costs, allowing it to scrutinize the
trade and avoid breaching the price cap.
“The State Bank of India is very cautious in its approach,” said one of the sources, even though New Delhi does not follow a rate cap mechanism and Western insurance and freight are not used for deliveries.
Indian refiners usually buy Russian crude at a price that includes delivery to India.
Most Indian refiners buy Russian crude from Dubai-based trading firms such as Everest Energy and Litasco, a unit of Russian oil giant Lukoil Oil.