Why Are Russian Oil Tankers Avoiding Indian Shores? Payment Dispute between India and Russia
Russian oil tankers, previously lingering near India’s shores, are altering their course amid unresolved payment disputes between the two nations. Ship-tracking data compiled by Bloomberg reveals that five oil tankers carrying Sokol oil, stationed close to India and Sri Lanka for approximately a month, have now changed direction, heading eastward toward the Malacca Strait.
The NS Century, another Russian vessel, remains adrift near the shores of Sri Lanka, having idled for over a month. Reports from Bloomberg suggest that Indian officials are deliberating on whether to permit the ship to unload its cargo.
This development follows challenges arising from payment discrepancies between Indian refiners and Russia. According to sources familiar with the matter, Indian refiners are attempting to pay for Russian oil in dirhams, the currency of the United Arab Emirates (UAE). However, a unit of Rosneft, a major Russian state-run oil company, has encountered obstacles in opening a bank account in the UAE, hindering its ability to accept payments.
Back in October, Reuters reported that at least seven oil shipments from Russia to India had not been settled. The ongoing payment issues have become a focal point in the relationship between the two nations, particularly as India grapples with diplomatic pressures.
India’s decision to pay for Russian oil in dirhams comes amidst increased scrutiny from the United States. The NS Century, a Russian tanker, faced sanctions in late 2023 for trading oil with Russia above the imposed $60 per barrel price cap. These restrictions are part of the Western efforts to intensify economic pressure on Russia, targeting its energy revenue utilized in funding the conflict in Ukraine.
India, emerging as one of Russia’s principal oil customers since the commencement of the Ukrainian invasion in 2022, finds itself in a delicate position. Russia, currently directing the majority of its oil exports to China and India, has experienced a setback in shipments to India due to persisting payment issues. Notably, Russian oil exports to India witnessed a sharp decline in December, with Indian refiners reportedly not receiving any Sokol crude during that month, according to data from Kpler cited by Bloomberg.
Impact on Diplomatic Relations and Global Oil Dynamics
The redirection of Russian oil tankers and the payment standoff between India and Russia underscore the complex geopolitical dynamics at play. India, navigating between honoring its commitment to Russia and managing its relationship with the U.S., faces the challenge of maintaining a delicate balance amid global geopolitical tensions.
The unresolved payment disputes are not only straining bilateral relations but also impacting the global oil landscape. Russia’s reliance on energy exports for funding its actions in Ukraine is being met with resistance from the international community. The redirection of oil shipments reflects the interconnectedness of global economies and the intricate web of diplomatic and economic relationships.
As the situation continues to evolve, the world watches closely, recognizing the broader implications of these developments on the region’s fragile balance of power and economic stability.
