Indian banks are considering financing unsanctioned Russian oil trade

Banks in India are now willing to consider financing Russian oil trade if the volumes come from non-blacklisted sellers and the transactions comply with sanctions, people familiar with the matter said.

That’s a shift from a few weeks ago — before the latest U.S. measures, which took effect Friday — when lenders were wary of clearing payments for Russian shipments, citing difficulties in verifying the supply chain, the people said. Due to the sensitivity of the matter, they declined to be named.

India’s oil purchasing patterns are in the spotlight as Washington ramps up pressure on Moscow over the war in Ukraine, while promoting talks aimed at ending the conflict. The South Asian country is a crucial buyer of Russian crude, although local refiners have been able to secure alternative, more expensive barrels in a well-supplied global market.

Banks have worked out a compliance mechanism to meet refiners’ payment requests for Russian barrels, the people said. Among them, transactions could be processed in United Arab Emirates dirhams and Chinese yuan.

Indian lenders and refiners are also stepping up verification, checking where oil is produced and examining ships used for transit, the people said. The steps include looking at the history of ships, including whether they were involved in ship-to-ship transfers linked to a blacklisted entity, the people added.

Most Indian refiners had skipped placing orders for Russian crude for December delivery due to US sanctions on key producers Rosneft PJSC and Lukoil PJSC. That contributed to the reining in of Gazprom Neft PJSC and Surgutneftegas PJSC. Together, the measures have dealt a blow to a trade that has flourished since Russia’s invasion of Ukraine in 2022, when India became Moscow’s biggest buyer of seaborne crude.

Given the constraints, the discount on Russia’s Urals grade has risen to around $7 per barrel versus the Dated Brent benchmark. That has increased the incentive for price-sensitive local refiners to explore options for acquiring the low-priced oil. Before the latest sanctions, the discount was about $3.

To be fair, refiners are still wary that cargo linked to sanctioned companies could trigger a freeze in payments and expose them to costly arbitrage or secondary sanctions, the people said. While stricter controls may slow bookings, they are expected to keep at least some of Russia’s flows alive.

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Published on November 25, 2025