The delivery of Russia's Sokol crude oil to the Indian Oil Corp (IOC) has reportedly faced a setback due to payment issues, causing shipment delays. The crude oil seller is the government-owned Russian oil company Rosneft.

Two people familiar with the matter told Reuters that the payment issue has forced India's biggest refiner to draw from its inventories and purchase more oil from the Middle East. The sources said Sokol oil is being supplied to IOC by Rosneft's unit, Sakhalin-1 LLC.

(Photo : Hannibal Hanschke/Getty Images)
SCHWEDT, GERMANY - MAY 03: The PCK oil refinery, which is majority owned by Russian energy company Rosneft and processes oil coming from Russia via the Druzhba pipeline, stands on April 30, 2022 in Schwedt, Germany.

Russia, India Payment Problems 

According to the sources, the problem arises from the inability of the Rosneft unit to open a bank account in the United Arab Emirates (UAE) to receive payments in the local currency, dirham. 

As a result, six cargoes of Sokol oil, including those from NS Century, scheduled for delivery to IOC from late November to December have experienced delays, according to Reuters, which cited shipping data. 

These cargoes are now stuck at sea, floating around India and Sri Lanka, while those from NS Century are heading towards Singapore. The NS Century was placed under US sanctions last month. IOC is the only state refiner with an exclusive annual agreement to buy Russian grades, including Sokol, from Rosneft.

Indian state refiners settle payments for oil trade with Russia in UAE dirhams following the government's advisory against using the Chinese yuan. However, private refiners can still opt for yuan payments due to the lack of alternatives available. 

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Russia Oil Company to Still Deliver the Crude Oil to India

One of the sources noted that the Russian supplier still intends to deliver the crude oil to India as soon as a solution is found. India has been one of the biggest buyers of sea-borne Russian oil since European customers retreated due to Russia's invasion of Ukraine last year.

Last week, the Indian oil ministry told a parliamentary panel that state oil firms face problems paying for Russian oil as not all banks in India can process payments in US dollars.

India's refiners purchase oil in Russia on a delivered basis because Western sanctions pose challenges in arranging ships, payments, and insurance. Last year, India established a method to pay imports, including crude, in rupees.

Bloomberg reported earlier this month that around five million barrels of Sokol oil being shipped from Russia to India never arrived. 

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