Russian oil traders shift to yuan to simplify payments for Indian buyers

Traders supplying Russian oil have started requesting payments from Indian state refiners in Chinese yuan, viewing the recent thaw in relations between New Delhi and Beijing as an opportunity to simplify transactions, according to trade sources.

India’s largest state-owned refiner, Indian Oil Corporation (IOC), has reportedly settled payments in yuan for two to three shipments of Russian crude, sources familiar with the companies’ oil deals told Reuters.

Following Western sanctions imposed on Moscow after its 2022 invasion of Ukraine, oil trade settlements have increasingly shifted away from the US dollar toward alternative currencies such as the Chinese yuan and the UAE dirham.

In 2023, Indian state refiners briefly used yuan for payments on Russian oil purchases but halted the practice after the Indian government objected, amid strained ties with Beijing. Private refiners, however, continued to use the Chinese currency.

Traders now aim to streamline the payment process by removing an intermediate conversion step. Previously, payments made in dirhams or dollars had to be converted into yuan—since only yuan can be directly exchanged for roubles used to pay Russian producers—adding extra costs, one trader explained.

According to sources, Russian oil is still being priced in dollars to comply with the European Union’s price cap, but sellers are seeking equivalent payments in yuan. The use of the Chinese currency is expected to broaden access to Russian crude for Indian state refiners, as some traders refuse to accept other currencies.

India has become the leading buyer of discounted Russian seaborne oil since Western nations halted imports from Moscow due to sanctions. The growing use of the yuan could further strengthen this trade.

The shift comes amid signs of improving India-China relations. The two countries recently resumed direct flights after more than five years, and Indian Prime Minister Narendra Modi made his first visit to China in seven years last month to attend a meeting of the Shanghai Cooperation Organisation (SCO).

By Tamilla Hasanova