Reliance Industries Ltd., Bharat Petroleum Corp Ltd. and Nayara Energy Ltd. are among the number of Indian oil refineries using the UAE’s Dirham for some cross-border crude oil payment under Western delivery conditions more and more preferring it over USD.

According to local business wires, buyers have converted some transactions into the Arabic currency. Fees vary by carrying capacity, depending in part on individual trading deals.

The recent European Union ban on imports of petroleum products from Russia had made India an increasingly important buyer of all sorts of raw oil cargoes. Russia has been a supplier of crude oil to India since June last year as cargo previously intended for Europe was diverted to Asia, often forcing Russia to sell oil for under $60 a barrel.

The UAE’s Dirham provides both Indian buyers and Russian sellers with a relatively predictable dollar-pegged currency without the potential complication of dollar sanctions. Even in transactions that do not directly violate U.S. and EU restrictions, some intermediary banks often take extra steps to avoid any risk to other banking relationships abroad, which makes them increasingly unwilling to face the hassle.

India is the UAE's second-largest trading partner, and officials are working on a mechanism to increase trade in Dirhams and Rupees. However, most oil deals are still carried out in U.S. dollars. According to India's oil minister Hardeep Singh Puri, “…officials are open to discuss the issue of payment preferences with other countries”. “If relevant demand is to greatly arise, we will need to talk.” — he added.

India is likely ready to accommodate Russia's requests for Dirham payments given favorable oil prices. However, the rejection of the U.S. dollar may draw the ire of some officials in Washington. Last week, senior U.S. Treasury Department sanctions official Brian Nelson visited Abu Dhabi, voicing concern over “certain financial deviations”.