Payment issues have hindered the delivery of Russian Sokol crude oil to Indian Oil Corp (IOC). India prefers to pay in rupees, but Russia is reluctant to accept this currency. Additionally, the Rosneft unit responsible for selling the oil has been unable to establish a bank account in the United Arab Emirates (UAE) to receive payments in dirhams.

Moscow has been actively seeking to reduce its reliance on the US dollar in international trade. However, this effort has resulted in a significant number of Russian oil barrels being stranded at sea due to difficulties in settling payments in alternative currencies.

The payment issues have delayed six cargoes of Sokol oil that IOC was scheduled to receive between late November and December. As a result, these cargoes have been largely stranded in waters near India and Sri Lanka.

The challenges in paying for Sokol oil underscore the difficulties of conducting business with Russia amidst the extensive sanctions imposed in response to its invasion of Ukraine. India has become a major purchaser of Russian oil following Western sanctions against Moscow, which have restricted dollar-denominated trade with Russia.

To mitigate the risks associated with using US dollars, India has insisted on settling transactions in rupees. However, the rupee is subject to Indian government controls and is not fully convertible, making it difficult to exchange for other currencies. This has created challenges for Russia, which has been left with billions of rupees that it cannot easily use.