Shipments of Russian Sokol crude oil to Indian Oil Corp (IOC.NS) have been delayed by payment problems, forcing India's biggest refiner to draw from its inventories and buy more oil from the Middle East, two sources familiar with the matter said.
IOC is the only state refiner that has an annual deal to buy a variety of Russian grades, including Sokol, from Russian oil major Rosneft. Sokol oil is supplied to IOC by Sakhalin-1 LLC, a unit of Rosneft, sources said.
Indian state refiners settle oil trade with Russia in United Arab Emirates dirhams after the government advised them against use of the Chinese yuan, though private refiners are still paying in yuan owing to a lack of alternatives.
IOC's payments for Sokol oil have been hampered because Sakhalin-1 LLC has been unable to open an account with a bank in the UAE to accept dirham payments, said the sources, who declined to be identified because they are not authorised to speak to the media.
Representatives of IOC and Rosneft did not immediately respond to requests for comment.
IOC was supposed to receive six Sokol cargoes from late November to December, shipping data showed. This included NS Century, which was placed under U.S. sanctions last month.
These cargoes are now mostly floating around India and Sri Lanka while NS Century is heading towards Singapore, the data shows.
"The supplier has an intent to deliver crude oil. Hopefully a solution will be found soon," one of the sources said.
India has emerged as the biggest buyer of sea-borne Russian oil since the retreat by European customers after Russia's invasion of Ukraine last year.
India's oil ministry has told a parliamentary panel that state oil companies face challenges in paying for Russian oil because not all Indian banks can process payments in U.S. dollars for Russian oil, according to a report tabled in parliament last week.
Indian refiners buy Russian oil on a delivered basis because western sanctions pose challenges in arranging ships, insurance and payments. Last year India set up a mechanism to pay in rupees for imports including crude.
However, suppliers have expressed concern about the repatriation of funds and high costs associated with conversion of funds along with exchange fluctuation risks, the ministry told the parliamentary panel.
It added that suppliers had asked IOC to bear additional transactional costs for accepting payments in rupees.
The ministry also told the panel that Indian refiners are abiding by the $60 per barrel price cap imposed by G7 nations on oil at Russian ports.
Below is a table of Sokol cargoes affected by payment problems.
