India has been paying for oil from Russia in hard currency, Pavan Kapoor, India’s ambassador to Russia, told RIA Novosti on the sidelines of the Eastern Economic Forum in Vladivostok on Tuesday. The statement comes amid concerns over the imbalance in bilateral trade between the two countries, leading to the accumulation of billions of rupees that Russia has earned from its exports to India.
“Over the past 18 months, we haven’t purchased Russian oil in rupees; it has always been in hard currencies. I would like to clarify this,” he said.
Earlier, Russian Foreign Minister Sergey Lavrov told the media in New Delhi that the Indian government will propose various investment options for the “billions of rupees” that have accumulated in special vostro accounts which Indian banks hold for Russian banks in the domestic currency. Russian companies have been unable to repatriate these rupees due to local currency restrictions.
In August, former Otkritie Bank CEO Mikhail Zadornov, in his column for RBK media outlet, wrote that the weakening of the ruble was due to problems with the conversion of rupees that Russian oil companies received from exports to India.
The Ministry of Energy refuted the claims, stating that oil companies repatriate the majority of their foreign currency earnings regardless of the payment currency, and any delays are not of a systemic nature. The central bank, however, said the accumulated volumes of rupees in exporters’ accounts are insignificant when measured as a proportion of the total foreign currency revenue
India, which imports more than 80% of its overall oil needs, increased its consumption of Russian crude since last year, ousting traditional Middle Eastern suppliers Saudi Arabia and Iraq from the top spots. Discounts offered by Moscow have also enabled India to become a major exporter of oil and petroleum products.
In June, India’s imports of Russian oil hit another record, exceeding the combined shipments from Saudi Arabia and Iraq. Daily volumes that month climbed to 2.2 million barrels, rising for the tenth month in a row, according to data tracked by Kpler, as cited by Bloomberg. Russian crude shipments to India have, however, slipped from their record highs in the past months largely due to a seasonal fall in demand and maintenance outages. However, experts predict a rebound to follow.