In a significant move that underscores the evolving dynamics of global trade, India’s Reliance Industries has inked a one-year deal with Russia’s Rosneft to purchase oil in roubles. This shift aligns with Russian President Vladimir Putin’s directive for Moscow and its trading partners to bypass the Western financial system amid ongoing U.S. and European sanctions.
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| Reliance Industries has signed a one-year deal with Russia's Rosneft to buy at least 3 million barrels of oil a month in roubles, as per the report |
Key Details of the Deal
According to sources close to Reuters, Reliance, which operates the world’s largest refining complex, will buy at least 3 million barrels of oil monthly from Rosneft. The agreement, effective from the start of the Indian financial year on April 1, allows Reliance to secure discounted crude oil amidst anticipated supply cuts by the OPEC+ group.
OPEC+, consisting of the Organisation of the Petroleum Exporting Countries and allies including Russia, is set to discuss extending these cuts in a meeting on June 2. This move is crucial for Reliance as it navigates the fluctuating oil market.
India’s Growing Role in Russian Oil Imports
India, now the largest buyer of seaborne Russian crude, has significantly increased its imports since Western nations imposed sanctions on Moscow following Russia’s 2022 invasion of Ukraine. Payments for these imports have been made in various currencies, including rupees, dirhams, and Chinese yuan, reflecting India’s flexible approach to circumvent financial restrictions.
While state-owned Indian refiners have been active in the spot market for Russian oil due to challenges in finalizing term supplies, Reliance’s new deal with Rosneft ensures a stable supply at favorable rates. This deal includes the purchase of two cargoes of approximately one million barrels of Urals crude monthly, with the option to buy four additional cargoes at a $3 per barrel discount to the Middle East Dubai benchmark. Additionally, Reliance will buy one to two cargoes of low-sulphur ESPO Blend crude from Russia’s Pacific port of Kozmino at a $1 premium to Dubai quotes.
Strategic Implications and Payment Mechanism
Rosneft has emphasized its strategic partnership with India, highlighting ongoing collaborations in oil production, refining, and trading. The company maintains that its commercial valuation approaches are consistent across private and state-controlled entities.
To facilitate the rouble-based transactions, Reliance will utilize India’s HDFC Bank and Russia’s Gazprombank, though specific details of the payment mechanism remain undisclosed. Both HDFC Bank and Gazprombank declined to comment on the arrangement.
Reliance’s strategic pivot to rouble payments signifies a broader trend of diversifying trade mechanisms to mitigate the impact of Western sanctions. As global trade continues to adapt to geopolitical shifts, this deal marks a pivotal moment in the India-Russia energy partnership, potentially setting a precedent for future international trade agreements.
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