Global Courant
By Nidhi Verma
NEW DELHI (Reuters) – Indian refiners have begun paying for some of Russia’s oil imports in Chinese yuan, sources with direct knowledge of the matter said, as Western sanctions force Moscow and its customers to look for alternatives to the dollar. to settle payments.
Western punishments for Russia’s invasion of Ukraine have shifted global trade flows for its major exports, with India emerging as the largest buyer of Russian oil by sea, even as it questions how to pay amid the shifting sanctions.
The US dollar has long been the main oil currency, including for purchases by India, but now the yuan plays an increasingly important role in Russia’s financial system as Moscow has been frozen out of the dollar and euro financial networks by international sanctions.
China has also switched to the yuan for most of its energy imports from Russia, which overtook Saudi Arabia to become China’s main supplier of crude oil in the first quarter of this year.
“Some refiners pay in other currencies, such as the yuan, if banks are unwilling to settle trades in dollars,” an Indian government source said.
Indian Oil Corp, the country’s largest buyer of Russian crude, in June became the first state refinery to pay for some Russian purchases in yuan, three sources familiar with the matter said.
At least two of India’s three private refiners also pay for a portion of Russia’s imports in yuan, two other sources said.
All sources declined to be named due to the sensitivity of the matter. None of India’s private refiners – Reliance Industries Ltd, Russian-backed Nayara Energy and HPCL Mittal Energy Ltd – responded to requests for comment. Indian Oil also did not respond to a request for comment.
It could not be immediately determined how much Russian oil Indian refiners bought with yuan, although Indian Oil paid for several shipments in yuan, sources said.
The rise in yuan payments has boosted Beijing’s efforts to internationalize its currency, with Chinese banks promoting its use specifically for Russian oil trade.
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Since sanctions were imposed on Moscow, Indian refiners have mainly bought Russian crude from Dubai-based traders and Russian oil companies such as Rosneft, the Litasco unit of Russian oil company Lukoil and Gazprom Neft, according to shipping data collected by Reuters.
Indian refiners also settled some non-dollar payments for Russian oil in United Arab Emirates dirhams, sources say.
“The first preference is to pay in dollars, but refiners sometimes pay in other currencies such as dirhams and yuan if sellers ask for it,” said the government source, who declined to elaborate and declined to identify Indian companies that pay for Russian oil in yuan.
India’s oil and finance ministries, which had previously tried to convince Russia to accept rupees for oil payments, did not respond to requests for comment.
Reuters reported in March, citing government officials and banking sources, that India had asked banks and traders not to use the yuan to pay for Russian imports because of longstanding political disagreements with China. It was not immediately clear whether recent purchases will change that.
India’s imports from Russia hit a record high in May, with Russian crude accounting for 40% of India’s total oil imports, compared to 16.5% a year earlier, denting purchases from Iraq and Saudi Arabia .
SANCTIONS MINEFIELD
While Western sanctions against Moscow are not recognized by India and Russian oil purchases may not violate them, Indian banks are hesitant to clear payments for such imports.
In May, the State Bank of India, the country’s largest lender and a major banker to state refineries, rejected the IOC’s planned payment in dollars for a cargo delivered by Rosneft, two sources said.
The cargo was loaded onto the tanker NS Bora, handled by Dubai-based Sun Ship Management, an entity linked to Russia’s largest state-owned shipping company Sovcomflot, which the European Union approved in February and the United Kingdom in May.
In June, the IOC used ICICI Bank, an Indian private sector lender, to settle this trade with Rosneft by paying in yuan to the Bank of China, two sources with direct knowledge of the matter said. A private refinery also uses the same mechanism for payments for Russian oil, one of the sources said.
Since then, IOC has used the same method to pay with yuan for other cargoes from Rosneft, according to one of the sources with direct knowledge of the matter.
“Whenever the IOC gets into trouble, it will insist on payment in yuan,” the person said, adding that the IOC had asked Rosneft to consider delivering oil in ships not controlled by sanctioned entities.
Rosneft did not respond to a request for comment.
Another state-owned refinery, Bharat Petroleum Corp Ltd, is also looking into payment in yuan for Russian oil, a separate source said.
“Many merchants (sellers) are insisting on payment in yuan,” the source said.
BPCL, ICICI, State Bank of India and Bank of China did not respond to requests for comment.
(Reporting by Nidhi Verma; editing by Tony Munroe and Tom Hogue)
