India Rushes To Pay For Russian Oil Ahead Of Sanctions Cutoff

India's state refiners are rushing to speed up payments for Russian crude, hoping to complete their trades before a dramatic expansion of Washington's curbs on Moscow's oil industry effectively comes into force next month, people familiar with the matter said.

Pressure to stay clear of sweeping US sanctions means the refiners are now aiming to settle payments for the discounted barrels in just two days instead of the previous five, said the people, who declined to be named as the discussions are private. 

The fate of at least 4.4 million barrels of Russian crude currently on their way to Indian ports hangs in the balance. At least six sanctioned tankers have loaded different grades and are sailing toward ports including Jamnagar, Chennai, Paradip and Visakhapatnam, and are due to discharge at these ports before the wind-down period ends, according to ship-tracking data from Bloomberg and Kpler.

The Mercury is expected to reach Paradip in eastern India this weekend, one of the earliest vessels to arrive. It is hauling more than 1 million barrels of Urals from Russia's Sheskharis terminal, loaded in mid-December.

Two sanctioned tankers discharged more than 1.4 million barrels at Indian ports in the state of Gujarat on Jan. 12, according to Kpler data. The Zaliv Amurskiy unloaded Urals at Jamnagar, while the Arjun delivered to Vadinar.

Indian banks — increasingly cautious in expectation of tougher measures from Washington, even before Friday's announcement — have been demanding additional paperwork since late last year, undertaking name screening and tracking incoming shipments. They are now ready to settle the payment on the basis of the bill of lading, the people said. 

Banks have also stopped processing payments in US dollars, to avoid having to adhere to the $60-a-barrel price cap on Russian crude set by Western nations in 2022. All payments for cargoes from Gazprom Neft PJSC, sanctioned on Friday, are being settled in rubles, the people said.

The US Office of Foreign Assets Control has set a deadline of Feb. 27 for the delivery of all crude cargoes that were loaded on sanctioned vessels prior to Jan. 10, the day sanctions were made public — a “wind down” period that Indian buyers are keen to make the most of.

India gets about a third of its oil imports from Russia. Government concerns with containing inflation have made the discounted crude particularly attractive, crowding out India's more traditional counterparties. The latest round of sanctions — targeting two large producers, as well insurers, traders and more than 180 vessels — have put that cheap supply at risk.