India Uncomfortable With Russia’s Demand That it Pays for Oil Bills in Chinese Yuan: Report

Oil bills since the end of September, up to “seven cargoes” worth, remain unpaid as Russia sees little use for rupees and wants money in yuan. Supplies to India are not hit so far, say reports.

New Delhi: The Indian government’s unease over letting state-controlled refiners pay in Chinese yuan for massive Russian oil imports it has incurred “has held up the payment for at least seven cargoes,” according to news agency Reuters.

Reuters reports citing persons with direct knowledge of the matter, it said. There is no disruption in Russian oil supplies so far, as Russian companies like Rosneft are continuing to supply Indian Public Sector refiners, “who are seeking alternative ways for settlement.”

Reuters had reported in July that Indians had made payments in yuan for some oil from Russian sellers. Public sector company and India’s biggest refiner, Indian Oil Corp, IOC, has used yuan and other currencies to pay for Russian oil, Reuters has reported previously.

Indian refiners continued to use dollars and dirhams to settle most of their Russian oil purchases.

But it appears Russia is pushing for yuan payments and the Indian government has become uncomfortable with using yuan for settlement, two finance ministry officials told Reuters.

“It is not banned and if a private firm has yuan to settle its trade, the government will not stop it, but it will neither encourage nor facilitate such trade,” a finance ministry official is quoted by Reuters as saying.

Russian companies the news agency contacted, Rosneft, Gazprom and Gazprom Neft, did not reply.

Russia is not looking to accept rupees, as the bilateral trade balance is tilted in Moscow’s favour, implying it would have little use for rupees.

But Reuters writes that in India, using the yuan could be interpreted “as benefitting China, when ties between the two neighbours remain strained after a border clash in 2020 in which 20 Indian soldiers and four Chinese troops were killed.”

New study: Yuan on the rise for Russian payments

In September, the European Bank for Reconstruction and Development (EBRD) found in its study, that the share of Russia’s imports invoiced in Chinese yuan soared to 20% in 2022 from a mere 3% a year earlier after its invasion of Ukraine meant a series of sanctions leaving Russia out of the global financial system, making it to tactically switch to the Yuan

US dollar and euro transactions, saw a sharp decline “in the same period to 67% from up to 80%,” as per the Study.

Ukraine war

The Ukraine war and the consequent sanctions on Russian oil have been exploited by India as it has emerged as among the top importers of Russian crude. For a while, it knocked off West Asia as its prime supplier. Reports in the BBC and The New York Times have mapped the journey of Russian oil for India. This has often been seen as a problem and the ships carrying the oil termed as a “dark fleet”. A mysterious Mumbai Company, Gatik Ship Management was reported to have been shipping large quantities of Russian oil, earlier this year. The company, having purchased more oil tankers than any other company since Russia invaded Ukraine last year.

But India’s imports of Russian crude were recently described as “a win-win situation for the world economy”, by the public sector’s Oil and Natural Gas Corporation or ONGC.

“By importing from Russia, India also has helped the global economy in the sense that [we] freed up some oil on the Gulf for other countries to source, particularly Europe. So it was kind of a win-win situation,” K.C. Ramesh, executive director of ONGC said on September 6.

He was referring to Russian crude being refined by India but being then sold to Europe and the West, allowing them to dodge sanctions.