New Delhi: Indian refiners, including Indian Oil Corp, have begun paying for some oil imports from Russia in Chinese yuan, Reuters reported, citing sources in know of the matter.
Since Moscow is not allowed to deal in dollars and euros as part of the international sanctions for its invasion of Ukraine, yuan has increasingly become an alternative for the country for settling payments.
At least two of India’s three private refiners are also paying for some Russian imports in yuan, two other sources told the news agency.
According to Bloomberg, Bharat Petroleum Corp. and Hindustan Petroleum Corp. are considering paying for Russian crude in yuan in an effort to widen their currency options.
However, the HPCL and BPCL executives told Bloomberg they weren’t aware of any payments in the Chinese currency.
In June, IOC used ICICI Bank to pay in yuan for Russian Oil from Rosneft, two sources with direct knowledge of the matter told Reuters.
Since then, IOC has used the same method to pay with yuan for other cargoes from Rosneft, one of the sources with direct knowledge of the matter said.
None of the Indian refiners – including Indian Oil, Reliance Industries Ltd, Russia-backed Nayara Energy and HPCL Mittal Energy Ltd – responded to Reuters’ queries on this matter.
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Payments in yuan
India has aggressively stepped up purchases of Russian oil and coal since the war in Ukraine began in February 2022. The move has helped India to secure raw materials at discounts compared to supplies from other countries.
India imported 2.17 million barrels per day of discounted Russian crude oil in June – the highest so far. In May, it bought 1.96 million barrels a day from Russia, which was 15% more than the previous high in April.
With the rise in cheap crude oil imports, Russia now accounts for 42% of all the crude oil India imports. As per reports, this is the highest share for any individual country in recent years.
Indian refiners have also settled some non-dollar payments for Russian oil in the United Arab Emirates’ dirham, sources told Reuters.
“Some refiners are paying in other currencies like yuan if banks are not willing to settle trade in dollars,” an Indian government source told Reuters.
The sources cited above told Reuters that it could not immediately be determined how much Russian oil Indian refiners have bought with yuan. They added that Indian Oil has paid in yuan for multiple cargoes.
In June 2022, UltraTech Cement, India’s biggest cement producer, was said to be paying for its coal imports in yuan, Reuters had reported.
Considered a rare move back then, settling payments in the Chinese currency appears to have become a viable option for India and other countries.
However, government officials had told Reuters that they are not comfortable with traders settling payments in yuan because of the long-standing political conflicts with China.
Meanwhile, Russian oil imports to India may decline in July, the Indian Express reported, citing Kpler data. Viktor Katona, Kpler’s lead crude analyst, told the daily that a decline in oil production in Russia and a higher demand from Russian refineries is expected to result in slightly lower dispatches to India.
In May this year, India and Russia suspended efforts to settle bilateral trade in rupees, Reuters reported. The decision to convince countries to settle payments in rupees would have helped in lower currency conversion costs.
Moscow would have ended up with an annual rupee surplus of over $40 billion if such a mechanism had been worked out. It believed rupee accumulation is ‘not desirable’, an Indian government official told the news agency.