NEW DELHI:
As Western sanctions compel Moscow and its customers to search for alternatives to the dollar, Indian refiners have started paying for some Russian oil shipments in Chinese yuan.
India has become the largest customer of seaborne Russian oil despite Western sanctions over Russia’s invasion of Ukraine.
Since international sanctions have cut Russia off from the dollar and euro banking networks, the yuan is becoming increasingly crucial in Russia’s financial system.
In the first quarter, Russia overtook Saudi Arabia as China’s leading crude supplier.
“Some refiners are paying in other currencies like yuan if banks are not willing to settle trade in dollars,” stated an Indian government source.
Three sources said Indian Oil Corp (IOC.NS), the country’s largest consumer of Russian crude oil, became the first state refiner to pay for some Russian purchases in yuan in June.
Two other sources stated two of India’s three private refiners pay for some Russian imports in yuan.
Due to sensitivity, all sources declined to be named. Reliance Industries Ltd (RELI.NS), Russia-backed Nayara Energy, and HPCL Mittal Energy Ltd did not respond to queries for comment. Indian Oil declined comment as well.
Sources stated Indian Oil paid in yuan for many shipments of Russian oil, but it was unclear how much.
Chinese banks are boosting yuan payments for Russian oil commerce as yuan payments rise.
According to shipping data compiled by Reuters, Indian refiners have mostly bought Russian crude from Dubai-based traders and Russian oil companies like Rosneft (ROSN.MM), Lukoil’s Litasco unit (LKOH.MM), and Gazprom Neft (SIBN.MM) since Moscow’s sanctions.
Sources say Indian refiners have also paid for Russian oil in UAE dirhams.
Discounted Russian oil reaches Karachi.
“First preference is to pay in dollars but refiners sometimes pay in other currencies such as dirham and yuan when sellers ask them,” said the government source, who declined to name any Indian companies paying in yuan for Russian oil.
India’s oil and finance ministries did not reply to calls for comment.
In March, government officials and financial sources told Reuters that India had instructed banks and traders to avoid using the yuan to pay for Russian imports due to long-standing political tensions with China. Recent acquisitions may have changed that view.
In May, Russia supplied 40% of India’s oil imports, up from 16.5% a year earlier.
Sanction minefield
Indian banks are wary of approving payments for Russian oil imports, even though India does not recognise Western sanctions against Moscow.
Two sources said State Bank of India (SBI.NS), India’s largest lender and a crucial financier for state refiners, rejected IOC’s dollar payment for Rosneft’s cargo in May.
The cargo was put on tanker NS Bora by Dubai-based Sun Ship Management, a business affiliated to Russia’s largest state shipping company, Sovcomflot (FLOT.MM), which the EU and UK sanctioned in February and May.
Two sources with firsthand knowledge said IOC utilised ICICI Bank (ICBK.NS), a private Indian lender, to settle this trade with Rosneft in June by paying Bank of China (601988.SS) in yuan. One source said a private refiner had used the same method to pay for Russian oil.
One person with direct information said IOC has paid with yuan for several Rosneft cargoes since then.
“Whenever IOC will face problems it would push for payment in yuan,” the person said, adding that IOC has urged Rosneft to send oil in non-sanctioned boats.
Rosneft ignored a request for comment.
A separate source said Bharat Petroleum Corp Ltd (BPCL.NS), another state refiner, is considering yuan payment for Russian oil.
“Many traders (sellers) are insisting for yuan payments,” the insider said.
BPCL, ICICI, State Bank of India, and Bank of China declined comment.
