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Indian oil companies discover utilizing $600 million stranded in Russia to purchase oil

Indian oil companies are exploring the potential of utilizing roughly $600 million of their stranded dividend revenue in Russia to purchase oil from the nation, officers mentioned.

India’s main oil enterprises, together with Indian Oil Company (IOC), a subsidiary of Bharat Petroleum Company Ltd, Oil India Ltd, and ONGC Videsh Ltd, have been unable to repatriate their dividend earnings stemming from investments in Russian oil and gasoline belongings.

These funds stay deposited in Russian financial institution accounts, as they can’t be transferred to India because of the stringent Western sanctions imposed following Moscow’s invasion of Ukraine.

That is at a time when Russia has emerged as the highest crude oil provider to India, accounting for greater than a 3rd of all purchases New Delhi makes from abroad. Officers mentioned one of many choices could possibly be to mortgage the cash mendacity in Russian financial institution accounts to entities shopping for oil. These entities might repay the mortgage in India.

The entities that purchase oil from Russia embody IOC and BPCL. “We are studying legal and financial implications of such a move,” an official advised PTI. “We’re conscious of the sanctions and don’t wish to do something which will in any method appeal to any breach.

“Indian state oil companies have invested USD 5.46 billion in shopping for stakes in 4 completely different belongings in Russia. These embody a 49.9 per cent stake within the Vankorneft oil and gasoline discipline and one other 29.9 per cent within the TAAS-Yuryakh Neftegazodobycha fields. They get dividends on income made by the working consortium from promoting oil and gasoline produced from the fields.

Quickly after Russia’s invasion of Ukraine in February final yr, a number of main Russian banks have been banned from the Society for Worldwide Interbank Monetary Telecommunication (SWIFT) monetary transaction processing system, constricting Moscow’s means to entry the worldwide funds system.

Additionally, the Russian authorities has put restrictions on the repatriation of {dollars} from that nation to examine volatility in overseas trade charges. This led to a scenario of dividend cash getting stranded in Russia.

ONGC Videsh Ltd (OVL), the abroad arm of state-owned Oil and Pure Fuel Company (ONGC), holds a 26 per cent stake in Suzunskoye, Tagulskoye and Lodochnoye fields — collectively generally known as the Vankor cluster within the north-eastern a part of the West Siberia.

Indian Oil Corp (IOC), Oil India Ltd (OIL) and Bharat PetroResources Ltd (a unit of Bharat Petroleum Corp Ltd or BPCL) maintain one other 23.9 per cent in the identical undertaking. Russia’s Rosneft is the operator with 50.1 per cent curiosity. The consortium of OIL, IOC and Bharat Petro Assets has a 29.9 per cent stake in TAAS-Yuryakh Neftegazodobycha.

Individually, OIL chairman and managing director Ranjit Rath mentioned about USD 150 million of dividend revenue of OIL is mendacity in financial institution accounts in Russia. The whole for its consortium (IOC and BPRL included) is about USD 450 million, he mentioned. OVL has one other USD 130 million of dividend revenue.

“We see this has a temporary phenomenon,” Rath mentioned. “We are working at three levels — exploring legal options, analysing banking challenges and using government-to-government to negotiations.” He, nonetheless, refused to elaborate.

Different officers mentioned the choices being explored embody utilizing the stranded cash to purchase oil. “IOC as well as BPCL already are big buyers of Russian oil and perhaps they can use that money to buy oil,” an official mentioned. “Authorized and monetary points in doing so are at present being studied.

“One other official mentioned an answer is prone to emerge in 2-3 months’ time. The dividend is mendacity with the Industrial Indo Financial institution LLC (CIBL), which was a three way partnership of the State Financial institution of India and Canara Financial institution. Canara Financial institution in March bought its 40 per cent stake in CIBL to SBI.

The dividend from TAAS was paid on a quarterly foundation, whereas Vankorneft’s earnings have been paid half-yearly. The Indian companies are choices of how you can repatriate the cash from Russia, Rath mentioned.

All dividend revenue previous to the Ukraine conflict was repatriated however the one which accrued after that’s caught. The operations of the fields haven’t been impacted they usually proceed to provide as regular, he added.

OVL additionally has a 20 per cent stake within the Sakhalin-1 oil and gasoline discipline in Far East Russia, and in 2009 acquired Imperial Power, which has fields in Siberia, for USD 2.1 billion.

With inputs from PTI.



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