• Indian state refiners have consolidated Russian oil payments to UAE dirhams routed through Emirati traders, moving away from earlier yuan considerations
  • Russia now supplies 35-40% of India's crude imports, up from just 0.2% before the Ukraine war
  • The payment shift reflects ongoing adaptation to Western sanctions and the failure of direct rupee-rouble settlement mechanisms

Indian state-owned refiners have standardized payments for Russian crude oil in United Arab Emirates dirhams, according to people familiar with the matter, settling through Emirati trading intermediaries as Western sanctions continue to reshape global energy finance.

The arrangement represents a consolidation of earlier payment experimentation that included consideration of Chinese yuan and other currencies. Three sources with direct knowledge of the transactions confirmed that major state refiners including Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum now predominantly use dirham-denominated payments channeled through UAE-based counterparties.

This payment mechanism has emerged as the most practical workaround after attempts to establish direct rupee-rouble settlements faltered earlier this year. "The dirham route through Dubai has become the established channel for most state refiners," said one banking executive familiar with the transactions, who asked not to be identified discussing confidential payment arrangements.

The shift comes as Russia has dramatically expanded its share of India's oil imports, now accounting for 35-40% of the country's crude purchases compared to a negligible 0.2% before the Ukraine conflict. India's Ministry of External Affairs has repeatedly characterized the country's energy procurement strategy as driven by national economic interest rather than political alignment.

Recent tightening of EU and G7 sanctions, including threats of secondary sanctions from the United States, has reinforced the move toward third-country currency settlements. International banks and shipping companies have grown increasingly wary of facilitating Russia-related transactions, creating opportunities for Middle Eastern financial intermediaries to capture this business.

While Russian traders had initially explored yuan payments with some Indian counterparts, the dirham has emerged as the more practical alternative for ongoing transactions. The development highlights both the persistent challenges in finding reliable dollar alternatives and the adaptive nature of global commodity markets under sanctions pressure.

Efforts to reach representatives from Indian Oil Corporation and Bharat Petroleum for comment were not immediately successful. A spokesperson for Hindustan Petroleum declined to comment on specific payment mechanisms.

Market participants note that despite these financial workarounds, logistical complications and rising shipping premiums have increased the overall cost of moving Russian crude to Indian ports. Vessel owners serving these routes have benefited from the complex transportation arrangements required to maintain the flow of discounted oil.

The payment evolution reflects broader trends among heavily sanctioned energy exporters, with parallel strategies emerging in Iranian and Venezuelan oil trades. Russia is also experimenting with cryptocurrency payments for some oil sales to both India and China, though volumes remain limited according to trading sources.

Correction: An earlier version of this article suggested yuan payments were currently being used for some transactions. The piece has been updated to reflect that dirham payments have become the predominant method.