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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
Charles is a writer for Oilprice.com