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Anti-Russian oil sanctions make India seek alternatives in Middle East

Anti-Russian oil sanctions make India seek alternatives in Middle East Photo: Russia is facing difficulties trying to supply oil to India (Getty Images)

The supply of Russian crude oil, specifically the Sokol crude oil, to the Indian Oil Corporation (IOC) has been delayed due to payment issues, reports Reuters.

It is noted that this compelled India's largest oil refinery to use its reserves and purchase more oil from the Middle East. IOC is the sole state-owned refinery that has entered into an annual agreement to purchase various Russian oil grades, including Sokol, from the Russian oil company Rosneft.

Indian state-owned oil refineries conduct transactions for oil trade with Russia in UAE dirhams following the government's advice against using the Chinese yuan. Private refineries, however, continue to use yuan due to a lack of alternatives.

Payments for Sokol crude oil were complicated as Sakhalin-1 LLC, a company involved in the transactions, was unable to open an account in a UAE bank to receive payments in dirhams.

According to shipment data, IOC was supposed to receive six cargoes of Sokol from late November to December. This included deliveries from NS Century, a company that fell under U.S. sanctions last month. Current data shows these cargoes are mostly circulating around India and Sri Lanka, while NS Century's cargo is heading to Singapore.

"The supplier has an intent to deliver crude oil. Hopefully, a solution will be found soon," says one of the sources.

Western sanctions are impeding oil trade between Russia and India

At the end of November, it was reported that the Indian route, one of the most lucrative Russian oil trade routes since the imposition of Western sanctions, is facing serious problems due to issues with non-dollar payments.

Bloomberg also recently reported that approximately five million barrels of Russian Sokol crude were stranded on their way to Indian refineries due to new U.S. sanctions.