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India Has Started Paying In Yuan For Some Russian Oil Imports

Some Indian refiners have paid in Chinese yuan for part of the crude oil cargoes they have bought from Russia, sources have told Reuters, as Moscow seeks alternatives to the U.S. dollar amid the sanctions while India looks to buy crude at discounts.   

India has become a top customer of Russia’s crude, alongside China, after the Western sanctions and the price cap on Russian oil. India’s crude oil imports from Russia are estimated to have hit a new record high of 2.2 million barrels per day (bpd) in June, having risen in 10 consecutive months.

More than a year since the Russian invasion of Ukraine began, India has turned from a marginal buyer of Russian crude to the most important market for Moscow’s oil alongside China. Indian refiners, not complying with the G7 price cap and looking for cheap opportunistic purchases, have snapped up many of the Russian Urals cargoes, which used to go to northwest Europe before the EU embargo.

State-held giant Indian Oil Corporation became the first Indian state refiner to pay in yuan for Russian crude oil in June, according to three Reuters sources. At least two of the three private refiners have also settled crude trades in yuan in recent weeks, other sources told Reuters.

The first preference of the Indian refiners is to pay in U.S. dollars, but if that’s not possible, for example, banks unwilling to settle trades with Russia in dollars, payments in other currencies are being made, such as in UAE dirhams or Chinese yuan, an anonymous government source told Reuters.

The yuan payments for Russian crude oil are part of both Russia and China’s efforts to sideline the U.S. dollar as the currency of choice in international trade.

Over the past year, Russia has turned to trade in yuan in the wake of the Western sanctions on its exports, imports, and energy trade, as the Chinese currency has become Putin’s only alternative to reducing exposure to the U.S. dollar and the euro, and limiting the fallout of the sanctions that have seen Russian state assets seized in Western countries.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on July 03 2023 said:
    India is paying for Russian crude oil imports in both rupee and petro-yuan. India would prefer to pay in rupee but Russia's Central Bank has accumulated so much rupees far beyond what Russia may need to import from India.

    President Putin started a full scale de-dollarization of the Russian economy in 2014 after the United States imposed sanctions on his country in the aftermath of the annexation of the Crimea, . He followed it in April 2022 by demanding payments for Russian oil and gas in ruble after Western sanctions were imposed on his country.

    Since then, the global de-dollarization campaign has been gaining momentum as countries around the world seek alternatives to the hegemony of the dollar. China, Russia, Brazil, India, ASEAN nations, Kenya, Saudi Arabia, and the UAE to name but a few are now using local currencies in trade.

    Even the Financial Times newspaper has acknowledged that a multipolar currency world is emerging.

    Sooner or later Saudi-led Gulf Cooperation Council (GCC) countries will adopt the petro-yuan. Once the adoption has become a reality, the petrodollar’s share in global oil trade will decline by 20%. And with China paying for its imports in petro-yuan, Russia selling its crude in rubles, Indian rupees and petro-yuans and India paying rupees and petro-yuans for its imports, the share of the petrodollar in the global oil trade could plummet by 60% leading to a devaluation of the dollar by one third to one half overnight. This will be the most devastating blow for the US economy and its financial system.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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