According to officials, Indian oil companies are looking into the possibility of using the nearly USD 600 million in dividend income that is currently stuck in Russia to purchase oil there. The top four oil companies in India, including Oil India Ltd., ONGC Videsh Ltd., and Indian Oil Corporation (IOC), a division of Bharat Petroleum Corporation Ltd., have not been able to repatriate dividend income from their investments in Russian oil and gas fields. Due to severe Western sanctions enacted in response to Moscow’s invasion of Ukraine, the money was lying in their Russian bank accounts but could not be transferred to India.
This is happening at a time when Russia has taken over as India’s top crude oil supplier, accounting for more than a third of all international purchases made by New Delhi. One choice, according to officials, could be to lend the money that’s in Russian bank accounts to companies that are buying oil. These organizations might pay back the loan in India. The companies IOC and BPCL are among those that purchase oil from Russia.
“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% stake in the Vankorneft oil and gas field and another 29.9% 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.
The ability of Moscow to access the international payments system was restricted shortly after Russia invaded Ukraine in February of last year when several significant Russian banks were barred from the SWIFT financial transaction processing system. In order to curb the volatility of currency exchange rates, the Russian government has also imposed restrictions on the repatriation of dollars from that nation. As a result, there was a situation where Russian dividend money was stuck.
ONGC Videsh Ltd (OVL), the overseas arm of state-owned Oil and Natural Gas Corporation (ONGC), holds a 26% 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% in the same project. Russia’s Rosneft is the operator with 50.1% interest.
The consortium of OIL, IOC and Bharat PetroResources has a 29.9% 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. OVL has another USD 130 million of dividend income.
“We see this has a temporary phenomenon,” Rath said. “We are working at three levels — exploring legal options, analyzing banking challenges and using government-to-government to negotiations.” He, however, refused to elaborate. Other officials said the options being explored includes using the stranded money to buy 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 said. “Legal and financial issues in doing so are currently being studied.” Another official said a solution is likely to emerge in 2-3 months’ time.
The dividend is lying with the Commercial Indo Bank LLC (CIBL), which was a joint venture of the State Bank of India and Canara Bank. Canara Bank in March sold its 40% stake in CIBL to SBI. The dividend from TAAS was paid on a quarterly basis, while Vankorneft’s earnings were paid half-yearly. The Indian firms are looking at options of how to repatriate the money from Russia, Rath said.
All dividend income prior to the Ukraine war was repatriated but the one that accrued after that is stuck. The operations of the fields have not been impacted and they continue to produce as normal, he added. OVL also has a 20% stake in the Sakhalin-1 oil and gas field in Far East Russia, and in 2009 acquired Imperial Energy, which has fields in Siberia, for USD 2.1 billion.
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