The US treasury department’s Office of Foreign Assets Control (OFAC) has sought details of Russian oil purchases by including those by Indian entities in the last few months, the person said on condition of anonymity. Indian banks operating in the US include State Bank of India (SBI), Bank of Baroda and Bank of India.

The G7 introduced the price cap on Russian seaborne crude oil in December to limit Russia’s earnings from exports, which would, in turn, impact its military budget. The move bars the purchase as well as import of crude from Russia at rates exceeding the price cap. It is part of the strategy of the West to isolate Russia, as well as ensure a steady supply to stabilize global oil prices, which had surged following Russia’s invasion of Ukraine in February 2022.

“The oil marketing companies (OMCs) have shared the information with SBI. OFAC had asked for this information from banks having operations in the US,” the person added.

Mint had reported that SBI is taking steps to avoid violating US sanctions by inadvertently processing payments for Indian oil refiners that may have purchased Russian oil above the $60 per barrel price cap set by a US-led coalition.

The development comes amid rising global crude oil prices over the last three months following a decrease from the multi-year highs of last year. The December contract of Brent on the Intercontinental Exchange is currently trading at $93.49 a barrel, higher by 1.20% from the previous close. It is 17% higher than the levels seen in July.

Though details have been sought by the OFAC, it is unlikely Indian banks and OMCs will violate sanctions and the price cap regulations as oil is available from other sources at a discount, including Iraq, which is among the top two suppliers for India, a second person said.

“Indian banks will not do transactions above the price cap because if they were to do so, their overall businesses may be impacted,” said Prashant Vashisht, vice president of corporate ratings at Icra.

India and China have turned major importers of Russian crude since February 2022 after the supplier offered deep discounts. Currently, discounts on Russian oil stand in the range of $13-15 per barrel from the international market price, according to traders.

The import value of Russian crude oil was around $74 per barrel in August when India imported 7.63 million tonnes of Russian crude oil worth $4.15 billion, according to commerce ministry data. The cost includes freight, insurance and customs duty, which has not been included under the price cap mechanism.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have announced successive production cuts in the past few months, leading to a surge in oil prices. Furthermore, the recent Israel-Hamas war and the possibility of it becoming a regional conflict have resulted in higher prices.

Queries sent to the ministries of petroleum and natural gas and external affairs, US treasury department, SBI, Bank of Baroda and Bank of India, Indian Oil Ltd, Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd remained unanswered till press time. On 12 October, OFAC declared the imposition of sanctions on two retail entities, identifying two of their vessels as “blocked property”.

The sanctions are in place for these entities for transporting Russian crude oil above the price cap agreed upon by the coalition service providers.

“This action underscores the Treasury Department’s commitment with its international partners to responsibly reducing Russian government oil profits and constrain the Russian war machine. The Treasury and the coalition will remain vigilant in monitoring the compliance of shipping companies and vessels participating in Russian oil trade while using the services of Price Cap Coalition service providers,” OFAC said in a statement.

OFAC also came up with an advisory on behalf of Price Cap Coalition, outlining “specific best practices” in the maritime oil industry to enhance compliance with price caps on crude oil and petroleum products of Russian Federation origin, which were put in place by the G7, the European Union, and Australia.

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Updated: 22 Oct 2023, 11:37 PM IST