- Indian refiners have begun paying for some oil imports from Russia in Chinese yuan, sources with direct knowledge of the matter said.
- Western punishments over Russia’s invasion of Ukraine have shifted global trade flows for its top export, with India emerging as the largest buyer of seaborne Russian oil.
- The U.S. dollar has long been the main global oil currency, but now the yuan is playing an important role in Russia’s financial system because Moscow has been frozen out of the dollar.
Indian refiners have begun paying for some oil imports from Russia in Chinese yuan, sources with direct knowledge of the matter said, as Western sanctions force Moscow and its customers to find alternatives to the dollar for settling payments.
Western punishments over Russia’s invasion of Ukraine have shifted global trade flows for its top export, with India emerging as the largest buyer of seaborne Russian oil even as it casts about how to pay for it amid shifting sanctions.
The U.S. dollar has long been the main global oil currency, including for purchases by India, but now the yuan is playing an increasingly important role in Russia’s financial system because Moscow has been frozen out of the dollar and euro financial networks by international sanctions.
Indian Oil Corp, the country’s biggest buyer of Russian crude oil, in June, became the first state refiner to pay for some Russian purchases in yuan, three sources familiar with the matter said. At least two of India’s three private refiners are also paying for some Russian imports in yuan, two other sources said.
Since the imposition of sanctions on Moscow, Indian refiners have mostly bought Russian crude from Dubai-based traders and Russian oil companies, according to shipping data compiled by Reuters. Indian refiners have also settled some non-dollar payments for Russian oil in the United Arab Emirates dirham, sources have said. India’s oil and finance ministries, which had previously been trying to convince Russia to accept rupees for oil payments, did not respond to requests for comments.
Reuters reported in March, citing government officials and banking sources, that India had asked banks and traders to avoid using the yuan to pay for Russian imports because of long-running political differences with China. It was not immediately clear whether recent purchases represent a change in that view.
India’s imports from Russia rose to a record in May, with Russian crude oil accounting for 40% of India’s overall oil imports compared with 16.5% a year earlier, denting purchases from Iraq and Saudi Arabia.
While Western sanctions against Moscow are not recognized by India and its purchases of Russian oil may not violate them, Indian banks are wary of clearing payments for such imports. In May, the State Bank of India, the country’s top lender and a key banker for state refiners, rejected IOC’s planned payment in dollars for a cargo delivered by Rosneft, two sources said.
Another state refiner, Bharat Petroleum Corp Ltd is also exploring yuan payment for Russian oil, a separate source said. “Many traders (sellers) are insisting on yuan payments,” the source said. BPCL, ICICI, State Bank of India, and Bank of China did not respond to requests for comment.
(With inputs from agencies)
