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Western sanctions significantly harm Russia's oil sector, Reuters reports

Western sanctions significantly harm Russia's oil sector, Reuters reports Illustrative photo (Photo: Getty Images)
Author: Daria Shekina

Russia faced significant challenges in trading oil with India due to sanctions imposed by Western countries, reports Reuters.

It is noted that the problems escalated when India, which became the largest buyer of Russian seaborne oil after losing European clients, insisted on payment in rupees in July, causing trade activity to virtually halt.

Russian oil suppliers cannot negotiate deals in Indian rupees due to unofficial guidance from the Russian Central Bank, which refuses to accept this currency.

"One Russian banking source close to the Russian central bank said receiving revenue in a non-convertible currency with little value outside India was 'pointless'. Russia has limited opportunities to spend rupees as its imports from India are insignificant, another source said," the material reads.

The problems will only intensify

Around mid-August, two major Russian oil companies threatened to reroute approximately twelve tankers heading to India to other destinations.

As a temporary solution to the issues with Indian agreements, freight was paid using a combination of the Chinese yuan and Hong Kong dollar.

Reuters reports that problems will exacerbate with increased control over trade. Washington recently imposed its first sanctions in weeks against tanker owners transporting Russian oil at prices higher than Western price limits.

US sanctions against the Russian oil sector

US Treasury Secretary Janet Yellen recently stated that Washington was preparing stringent measures for violating the established oil price ceiling.

According to Reuters, the US Treasury Department has requested information from shipping companies in about 30 countries about approximately a hundred vessels suspected of transporting Russian oil in excess of the price ceiling.

Recently, Reuters reported that the price of Russia's primary export-grade oil, Urals, had returned to the sanctioned level set by the G7 countries at $60 per barrel.