Indian oil refiners have begun paying for some deliveries of Russian oil in Chinese yuan, Reuters reports citing its sources. Payments are also made in UAE dirhams.
Western sanctions imposed on Russia after the attack on Ukraine have changed the situation in the oil market. Now the main buyers of Russian oil are India and China. In addition, since it has become difficult to pay in dollars and euros due to restrictions with the Russian Federation, the yuan is starting to play an increasingly important role in Russian hydrocarbon exports.
According to Reuters sources, Indian refiners prefer to pay in Chinese currency if banks refuse to accept dollars. India's largest buyer of Russian oil, Indian Oil Corp, became the first company to partially switch to yuan settlements with Russia. At the same time, the dollar continues to be the main means of payment in the Russian oil market. However, "some refiners agree to pay in RMB or UAE dirhams at the request of the seller."
In May, India bought record volumes of oil from Russia, which accounted for 40% of all its deliveries to the country. A year ago, this figure was 16.5%, and the main suppliers were Iraq and Saudi Arabia.
Alexander Isakov, an economist for Russia at Bloomberg Economics, commented on the situation for The Insider:
There is no need for a 100% move away from settlements in dollars/euro for Russian oil, but settlements will most likely indeed be transferred to yuan, dirhams and rubles, which Indian counterparties can buy either on the domestic Russian or offshore market. According to the statistics of the Bank of Russia, a significant share of export earnings/settlements was nominated in rubles back in 2021, which could most likely be due to defense trade and the specifics of settlements in this area.
He also talked about the role of the dirham in paying for Russian oil:
The UAE is a major trading hub, and the dirham, like most currencies in the region, is firmly pegged to the dollar. Thus, dirham revenue is a proxy dollar revenue that can be used to finance imports from any other countries.
Russia tried to switch to supplying oil to India for rupees, however, as Russian Foreign Minister Sergei Lavrov later admitted , this led to billions of rupees accumulated in Russian accounts in Indian banks, which "have nowhere to go." This is due to the imbalance in trade between the two countries – Russia does not export goods from India in sufficient volume to effectively spend the Indian national currency.