India is experimenting with smart ways of billing for Russian oil imports, by excluding freight, insurance and other logistics costs, to stay within the West’s price cap of $60 per barrel and avoid economic sanctions in the face of rising price of Russian Urals, sources have said.

“The price of Russia’s Urals grade of oil, which was offered at a steep discount to India till some time back, has moved above $60 per barrel. To avoid sanctions, India is now looking at getting the billing done in a manner that it still buys the main oil below $60 while rest of the logistics cost, including insurance and freight, are separately billed,” a source tracking the matter told businessline.

As charges of freight from Russia to India could be as high as $19 per barrel and insurance cost, too, could be substantial, by billing them separately, the price of just the oil component can be maintained below $60 per barrel, the source added.

India’s crude oil imports from Russia in FY23 increased 14 times to $31.02 billion from $2.2 billion in the previous fiscal. In April-August 2023, Russia accounted for more than a third of oil imports into India at $19.36 billion.

“Russia is already saddled with an estimated over $8 billion in Indian rupees that it has accepted mostly for exporting defence equipment to India. It does not want to accept rupee for oil as the rupee balance in its vostro accounts is already high and its imports from India, using the accumulated rupee, is low. It is looking for avenues of investing some of the balance but has limited success yet,” the source said.

Early last year, the West imposed banking and economic sanctions against Russia following its war on Ukraine, which continues unabated. The Western nations, including the US and the EU, allowed trading in oil but came up with the price cap of $60 per barrel above which sanctions were to kick in. Below the cap, countries could also use US dollars to make payments if banks were agreeable.

India is continuing to pay for a part of its oil from Russia in Chinese yuan as it is a preferred currency for Russia which can use it for its imports from China. “Although the oil PSUs cannot buy Russian oil in yuan because the Centre does not approve of it, some may be buying Russian crude sourced by private companies in India paid for in yuan,” the source said.

Payment in UAE dirham, however, has dwindled as the country is under FATF scrutiny and wants to avoid trouble, the source added.

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