Mukesh Ambani's Reliance Industries signs a one-year deal with Russia's Rosneft

Mukesh Ambani-controlled Reliance Industries Limited has signed a one-year deal with Russia's Rosneft to buy at least 3 million barrels of oil a month in roubles, Reuters reported on Tuesday. This is after Russian President Vladimir Putin's push for Moscow and its trading partners to find alternatives to the Western financial system to facilitate trade despite US and European sanctions.

A term deal with Rosneft also helps privately run Reliance to secure oil at discounted rates at a time when the OPEC+ group of oil producers is expected to extend voluntary supply cuts beyond June.

Under the terms of the deal, which took effect at the beginning of the Indian financial year from April 1, Reliance will buy two cargoes of about one million barrels of Urals crude with an option to buy four more each month at a discount of $3 a barrel to the Middle East Dubai benchmark, the sources said.

"India is a strategic partner for Rosneft oil company," the Russian company said in an emailed response to questions from Reuters, adding that it does not comment on confidential agreements with partners.

"Cooperation with Indian companies includes projects in the field of production, oil refining and trading of oil and petroleum products."

The refiner will also purchase one to two cargoes a month of low-sulphur crude oil, mainly ESPO Blend exported from Russia's Pacific port of Kozmino, at a premium of $1 a barrel to Dubai quotes, the sources added.

Reliance has agreed to make payment for the oil using Russia's rouble through HDFC Bank, opens a new tab and Russia's Gazprombank (GZPRI.MM), opens new tab, the sources said. Further details on the payment mechanism were not immediately available.

The OPEC+ group comprising the Organisation of the Petroleum Exporting Countries (OPEC)) and allies including Russia is due to discuss the output cuts in an online meeting on June 2.

India, the world's third-largest oil importer and consumer, now leads in purchasing seaborne Russian crude after the West stopped buying due to sanctions following Russia's 2022 invasion of Ukraine. India even made payments in rupees, dirhams, and Chinese yuan for the Russian oil.

Earlier this month, the Central government had reportedly asked state-run oil refiners and Reliance Industries Ltd. to jointly negotiate a long-term supply deal with Russia. The government wanted the state-run refiners to lock in at least 33% of their contracted supply from Russia at a fixed discount to help shield the nation’s economy from volatile prices, government sources said.

Meanwhile, state-owned Indian refiners have been tapping spot markets for Russian oil because they were unable to finalise term supplies for this year.

Rosneft also said that commercial approaches to determining the value of sold crude are the same for all companies, regardless of whether they are private or state-controlled.

The shares of Reliance Industries closed at Rs 2,911.25, down by 0.72%.