India's Largest Refinery Inks Russian Oil Deal

Reliance Industries, the operator of the world's largest refining complex, has signed a one-year agreement with Russia's Rosneft to purchase at least 3 million barrels of oil monthly, with transactions conducted in roubles, according to four sources familiar with the matter.

This shift to rouble payments aligns with Russian President Vladimir Putin's initiative to encourage Moscow and its trading partners to find alternatives to the Western financial system amidst ongoing U.S. and European sanctions.

The agreement allows privately-run Reliance to secure oil at discounted rates, a strategic advantage as the OPEC+ group, including OPEC and allies such as Russia, is expected to extend voluntary supply cuts beyond June. The group will discuss these output cuts in an online meeting on June 2.

India, the world's third-largest oil importer and consumer, has emerged as the primary buyer of seaborne Russian crude since the West halted purchases and imposed sanctions following Russia's 2022 invasion of Ukraine. Payments for Russian crude by India have previously been made in rupees, dirhams, and Chinese yuan.

State-owned Indian refiners have been purchasing Russian oil on the spot market due to difficulties in finalizing term supplies for this year.

"India is a strategic partner for Rosneft," the Russian company stated in an emailed response to Reuters, adding that it does not comment on confidential agreements with partners. "Cooperation with Indian companies includes projects in production, oil refining, and trading of oil and petroleum products."

Under the terms of the deal effective from April 1, Reliance will buy two cargoes of approximately one million barrels of Urals crude each month, with an option for four additional cargoes, at a discount of $3 per barrel to the Middle East Dubai benchmark. Additionally, Reliance will purchase one to two cargoes monthly of low-sulphur crude oil, mainly ESPO Blend from Russia’s Pacific port of Kozmino, at a premium of $1 per barrel to Dubai quotes.

Payments will be made in roubles through India’s HDFC Bank and Russia’s Gazprombank. Further details on the payment mechanism were not immediately available, and both banks declined to comment.

Reliance did not respond to a request for comment on this development.

May 29, 2024