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Hundreds of millions of dollars in dividends payable to public sector Indian oil companies from their investments in Russian projects are being deposited into accounts in an Indian bank in Russia, even as the companies deliberate over ways to repatriate the stuck dividends to India, Oil India’s (OIL) Chairman and Managing Director Ranjit Rath said on Thursday.
Rath said the money was parked in bank accounts in Russia and the companies are earning interest on it, but getting it to India remains a challenge. He declined to elaborate on the options that Indian companies are considering.
The Indian bank in Russia where the money is parked is understood to be the Commercial Indo Bank (CIBL). CIBL used to be a joint-venture of SBI and Canara Bank, but the latter recently sold its stake in the venture to SBI.
Dividends payable to Indian oil companies — ONGC Videsh (OVL), OIL, Indian Oil Corporation (IOC) and Bharat PetroResources (BPRL) — are stuck due to payment channel-related issues in the aftermath of Russia’s February 2022 invasion of Ukraine. Soon after the war in Ukraine broke out, a number of major Russian banks were banned from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) financial transaction processing system, seriously constricting Moscow’s ability to access the global payments system.
OVL, the overseas investment arm of Oil and Natural Gas Corporation (ONGC), holds 20 per cent stake in the Sakhalin-1 and 26 per cent in Vankor. The consortium of IOC, OIL, and Bharat Petroleum Corporation’s upstream arm BPRL has 23.9 per cent share in Vankor and 29.9 per cent in Taas-Yuryakh. Around $300 million in dividends belonging to the consortium of IOC, OIL, and BPRL are parked in CIBL, said a senior official with one of the companies. Dividends belonging to OVL are also piling up.
In April, a top government official had said that dividends stuck in Russia totalled around $400 million. India and Russia have been discussing the issue on a regular basis and efforts are on from both sides to resolve it, said the government official, adding that while the dividend dues are not small in amount, they are insignificant in comparison to the overall oil trade between Russia and India and have no bearing on it.
From being a marginal supplier of crude to India before the war in Ukraine, Russia has emerged as New Delhi’s biggest source of oil over the past year, overtaking heavyweights like Iraq and Saudi Arabia. Indian refiners started snapping up Russian crude, which was being offered at a discount by Moscow as the West began to shun Russian barrels.
On being asked if the stuck dividends can be used to partly offset India’s oil payments to Russia, the senior company official said that while it was theoretically possible, such a solution is fraught with challenges related to taxation, accounting, and international tax jurisdictions.
