Indian state-owned refiners have restarted payments for Russian oil shipments in Chinese yuan, reflecting improving diplomatic ties between India and China. This shift streamlines transactions and reduces costs, as sanctions push Russian oil trade away from the US dollar. Indian Oil Corporation has led this payment resumption after a prior halt due to government concerns.
Recent developments indicate a significant shift in how Indian state refiners are settling payments for Russian crude oil imports. Traders supplying Russian oil have begun requesting Indian state-run refiners to pay in Chinese yuan. This move aligns with growing diplomatic warmth between New Delhi and Beijing and aims to simplify financial transactions in a sanctioned global environment.
India’s largest state-owned refiner, the Indian Oil Corporation (IOC), has reportedly made payments in yuan for two to three shipments of Russian crude. This recommencement of yuan payments at the state level marks a notable departure from 2023, when such payments were halted following Indian government concerns amid heightened tensions with China. During that period, only private refiners continued using the Chinese currency for settling transactions.
The backdrop to this currency shift is the continuing Western sanctions on Russia, imposed after its 2022 incursion into Ukraine. These sanctions have forced Russia and its trading partners to find alternatives to the US dollar, historically dominant in oil trade settlements. Besides yuan, currencies such as the UAE dirham have also become common in Russian oil payments.
Previously, traders had to convert payments from dirhams or dollars into yuan, the only currency directly exchangeable for Russian roubles needed by producers. The renewed preference for direct yuan payments eliminates this costly conversion step, reducing transaction expenses for Indian refiners.
Despite pricing Russian oil in US dollars to comply with the European Union’s price cap on Russian crude, sellers are now seeking equivalent payments in yuan. This dual approach helps maintain market compliance while opening channels for smoother, cost-effective settlements.
India has emerged as the largest importer of Russian seaborne oil following Western nations' suspension of direct purchases. The availability of yuan as a payment option could enhance access for Indian state refiners, especially since some traders refuse to accept other currencies.
This financial maneuvering coincides with diplomatic signs of warming India-China relations, including the recent resumption of direct flights after more than five years and Prime Minister Narendra Modi’s recent visit to China for the Shanghai Cooperation Organisation summit.
Key Highlights:
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Indian state refiners, led by Indian Oil Corporation, restart payments for Russian oil in Chinese yuan after a 2023 hiatus.
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The shift simplifies transactions amid growing India-China diplomatic warmth.
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Western sanctions on Russia drive alternative currency use, including yuan and UAE dirham, to bypass the US dollar.
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Direct yuan payments reduce costly currency conversion steps for traders and refiners.
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Russian oil is still priced in USD to comply with EU price caps but paid in yuan to streamline settlements.
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India is currently the top importer of Russian seaborne crude oil globally.
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Recent India-China rapprochement includes resumed direct flights and high-level diplomatic visits.
This development is a strategic financial adaptation reflecting broader geopolitical and economic realignments involving India, Russia, and China.
Sources: Reuters, Firstpost, Yahoo Finance, Global Banking and Finance Review.
