India’s casual diktat to grease PSUs towards utilizing Chinese yuan is escalating the payment crisis with Russia because the Urals grade oil imported from the nation has now breached the West’s value cap of $60 per barrel bringing funds in {dollars} to a close to halt, mentioned sources.

“Paying in dollars is no more an option for India since Russian Urals is now breaching the $60 price cap fixed by the G7 nations. Chinese yuan payments would work well for Russia, but the government is not willing to authorise PSUs to do so as it does not want to help strengthen China’s currency,” a supply monitoring the matter instructed businessline.

The personal sector, nonetheless, might pay in yuan for Russian crude sourced by it however accessing the foreign money from the worldwide market in bulk might not be really easy given the truth that it was not absolutely convertible, the supply added. 

India imported about $40 billion value of crude from Russia over the previous yr as Moscow supplied steep reductions following sanctions imposed on it by Western nations in response to its struggle towards Ukraine. Much of it was sourced by oil PSUs which have elevated their purchases within the current months. 

Also learn: Russia’s oil production cut starts to eat into India’s import volumes

Crude import from Russia

In May 2023, India’s crude import from Russia was valued at $8.5 billion which was nearly double of its import from Iraq at $4.6 billion and from Saudi Arab at $4 billion, per Commerce & Industry Ministry figures.

Payment for Russian imports in UAE dirham, which is another choice acceptable to Moscow, will not be working easily anymore as UAE banks, that are underneath scrutiny of the Financial Action Task Force (FATF), will not be wanting to take part, the supply added.

“Given the fact that Russia is not ready to take payments for oil in rupees, as its imports from India are low and it does not want to be stuck with rupee balances in its vostro accounts with Indian banks, the situation at hand is very tricky,” the supply added.

Russia is already caught with over $2 billion of rupee funds made by India for defence offers over the previous yr. “Russia has the option of investing its rupee balance in Indian government securities or stock markets, but it is not keen on doing so,” the supply mentioned.

Since each Russia and India have an interest events as each profit from the transaction in oil, a mutually acceptable approach for oil funds needs to be arrived at, the supply added.