Indian oil companies are exploring the possibility of using close to USD 600 million of their dividend income stranded in Russia to buy oil from that country, officials said on Thursday.
India’s top four oil companies — Indian Oil Corporation (IOC), a unit of Bharat Petroleum Corporation Ltd, Oil India Ltd and ONGC Videsh Ltd — haven’t been able to repatriate dividend income they accrue from their investments in Russian oil and gas fields. That money is lying in their bank accounts in Russia but could not be brought to India due to tough Western sanctions that followed Moscow’s invasion of Ukraine.
This is at a time when Russia has emerged as the top crude oil supplier to India, accounting for more than a third of all purchases New Delhi makes from overseas.
Officials said one of the options could be to loan the money lying in Russian bank accounts to entities buying oil. These entities could repay the loan in India.
The entities that buy oil from Russia include IOC and BPCL.
“We are studying legal and financial implications of such a move,” an official said. “We are mindful of the sanctions and do not want to do anything that may in any way attract any breach.”
Indian state oil firms have invested USD 5.46 billion in buying stakes in four different assets in Russia. These include a 49.9 per cent stake in the Vankorneft oil and gas field and another 29.9 per cent in the TAAS-Yuryakh Neftegazodobycha fields. They get dividends on profits made by the operating consortium from selling oil and gas produced from the fields.
Soon after Russia’s invasion of Ukraine in February last year, several major Russian banks were banned from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) financial transaction processing system, constricting Moscow’s ability to access the global payments system.
Also, the Russian government has put restrictions on the repatriation of dollars from that country to check volatility in foreign exchange rates.
This led to a situation of dividend money getting stranded in Russia. ONGC Videsh Ltd (OVL), the overseas arm of state-owned Oil and Natural Gas Corporation (ONGC), holds a 26 per cent stake in Suzunskoye, Tagulskoye and Lodochnoye fields — collectively known as the Vankor cluster in the north-eastern 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) hold another 23.9 per cent in the same project. Russia’s Rosneft is the operator with 50.1 per cent interest.
The consortium of OIL, IOC and Bharat PetroResources has a 29.9 per cent stake in TAAS-Yuryakh Neftegazodobycha.
Separately, OIL chairman and managing director Ranjit Rath said about USD 150 million of dividend income of OIL is lying in bank accounts in Russia.
The total for its consortium (IOC and BPRL included) is about USD 450 million, he said.
