More Indian oil refiners have begun paying for oil imports from Russia with China’s yuan, it has emerged, in another blow to the dominant US dollar.
At least two of India’s three private refiners have paid for some Russian imports in yuan, sources have claimed, as Western sanctions force Moscow and its customers to find alternatives to the dollar for settling payments.
Indian Oil Corp, the country’s biggest buyer of Russian crude oil, in June reportedly became the first state refiner to pay for some Russian purchases in yuan.
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Since the imposition of sanctions on Moscow, Indian refiners have mostly bought Russian crude from Dubai-based traders and Russian oil companies such as Rosneft, the Litasco unit of Russian oil major Lukoil, and Gazprom Neft, 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.
“First preference is to pay in dollars but refiners sometimes pay in other currencies such as dirham and yuan when sellers ask them,” said the government source, who did not elaborate further and declined to identify any Indian companies paying in yuan for Russian oil.
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.
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 for how to pay for it amid shifting sanctions.
The US 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.
China has also shifted to the yuan for most of its energy imports from Russia, which overtook Saudi Arabia to become China’s top crude supplier in the first quarter this year.
“Some refiners are paying in other currencies like yuan if banks are not willing to settle trade in dollars,” said an Indian government source.
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None of India’s private refiners – Reliance Industries Ltd, Russia-backed Nayara Energy and HPCL Mittal Energy Ltd – responded to requests for comment. Indian Oil also did not reply to a request for comment.
It could not immediately be determined how much Russian oil Indian refiners have bought with yuan, although Indian Oil has paid in yuan for multiple cargoes, sources said.
The rise in yuan payments has given a boost to Beijing’s efforts to internationalise its currency, with Chinese banks promoting its use specifically for Russian oil trade.
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 recognised by India and its purchases of Russian oil may not violate them, Indian banks are wary of clearing payments for such imports.
In May, 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, sources said.
- Reuters with additional editing by Sean O’Meara
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