Russian Oil Hit by global sanctions, Russia offers deep discounts to India on oil purchases: Report
New Delhi: Russia is offering India deep discounts on the direct sale of oil as most of its importers have backed out amid sweeping Western sanctions, including its exclusion from the cross-border payment system SWIFT, following the invasion of Ukraine, Bloomberg reported citing sources.
According to the report, Russia is offering discount of as much as $35 a barrel on prices before the war to lure India to order more shipments, sources said on conditions of anonymity.
Since then, headline Brent prices have risen about $10, which translates into an even larger reduction from current prices, the report said.
Russia wants India to take 15 million barrels contracted for this year to start with, the report said, adding that the talks are going on at the government level.
India is Asia's third-largest economy and the world's third-biggest oil importer and consumer.
Bloomberg reported on Wednesday that India was weighing the rupee-ruble-denominated payments option through an alternative to SWIFT.
After Russia's invasion of Ukraine, the U.S. and European Union blocked seven Russian banks from using the Belgium-based international payment system operator.
Russia had the second largest number of SWIFT subscribers after the US.
The Bloomberg report said that the rupee-ruble-denominated payments are likely to be done through Russia's messaging system through SPFS.
In 2014, the Central Bank of Russia developed the Financial Message Transfer System of the Bank of Russia (SPFS) to counter the US government's threats to oust Moscow from the SWIFT system. So far, it was being used domestically but after, its exclusion from the SWIFT network, SPFS is being used for international money transfers.
According to the Bloomberg report, India is among the few nations that have been doubling down on Russian crude, defying international pressure and sanctions.
The direct purchase is expected to involve Russia's Rosneft PJSC and the Asian nation's biggest processor Indian Oil Corp., which have an optional term contract -- that's rarely used -- for close to 15 million barrels a year, the report stated.
It's not clear what the upper end of the buying might be, but India is thought to have limited appetite for the grades being offered, the Bloomberg report noted.
India has never been a large importer of Russian oil due to high freight cost.
That contract has a built-in clause that Indian Oil will buy only when it's economical, the report said quoting the sources, adding that a discount offered by Russia could make the oil trade viable even at a higher freight.
Russia and India are mulling routing the oil through Russia's Vladivostok Port in the far east to avert shipping hurdles from the Baltic Sea in the west of the country and reach India's east coast refineries in less than 20 days, they said.
According to the report, India is looking to push the export of medicines, engineering goods, and chemicals to narrow its trade gap caused by oil and arms purchases.
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