Indian refiners pay for most of most of the Russian oil in dollars but some cargoes that are priced above the G7 price cap of $60 per barrel are paid for in non-dollar currency to avoid the US scrutiny. So far, it was UAE‘s dirham that Indian refiners used for paying Russian suppliers but now at least two refiners have paid in Chinese Yuan as well, according to people familiar with the matter.
The switch to Chinese yuan for some imports has been driven mainly by the demand from Russian suppliers who do not want all their non-dollar payments in dirham, people said. Indian refiners have also used yuan earned from exports to China to pay for the Russian oil, they said. China is already paying Russia for most of its oil imports in yuan and its banks are also making it easier for Indian refiners to pay in yuan for Russian oil, they added.
Indian Oil, HPCL, Reliance Industries, and Nayara Energy didn’t respond to ET’s request for comment. A BPCL executive said his firm hasn’t made any payment in Yuan.
The G7 price cap on Russian exports does not affect payment channels but since all dollar payments are settled in the US, the refiners and the Indian banks through which the payments are routed do not want to take chance. The warm relations between the UAE and Russia have made dirham the preferred currency for Russian oil suppliers.
Russia has a finite ability to accept dirham and Chinese yuan is a suitable alternative, a person with knowledge of the matter said. China is a huge exporter and Russia can use the yuan it earns to pay for its imports from China but its trade with the UAE is limited, the person said.
India has tried pushing rupee payment for Russian oil imports but a huge trade imbalance between the two countries has made it unviable. Russia doesn’t want to take more rupees as it’s unable to use the Indian currency it has already accumulated. Increasing use of the yuan helps China and Russia restrict the use of dollar in the international trade, the person cited above said, adding that it fits into the ongoing competition between the US and China to dominate the global economic order.
Russia is now the top supplier to India, accounting for 40% of its crude imports.
