India refuses to comply with Russia's pressure to buy oil in Chinese Yuan

Russian oil import: India is refusing to comply with Russian oil suppliers pressure to pay for the imports in Chinese Yuan, reported Bloomberg. As per the report, some Russian oil suppliers are demanding payment in yuan.

Chinese Yuan

The Indian government owns at least 70% of the oil refiners which makes them follow orders on payment instructions from the Ministry of Finance. After the biggest state refiner Indian Oil Corp had made a yuan payment for Russian crude in the past, the Narendra Modi government has clamped down on that.

Also Read: Indian oil firms explore using stranded $600 million to buy Russian oil

If the oil prices are above $60 a barrel cap imposed by the US and its allies on Russian oil, India mostly pays for Russian oil imports in US dollars, and a small amount of rupees. Otherwise the payment is mostly done in dirhams — the currency of the United Arab Emirates.

According to Bloomberg, Russian oil suppliers are requesting that the Chinese currency be the main unit of transaction for oil trade even though Yuan is used in smaller transactions.

Russia's Excess Rupees

This comes amid Russia's excess supply of rupees, which it’s struggling to use, while at the same time its demand for yuan has grown sharply in the past year. Russia's economy has become more reliant on China for imports. Russian businesses have been settling more of their trade in yuan, with the Chinese currency this year replacing the dollar as the most traded currency in Russia

Meanwhile, as rupee isn't fully convertible currency internationally, it is difficult to use in global trade. Some Russian suppliers are not in favour of India's choice of using Dirhum as it requires them to conduct the transactions out of Dubai, which would result in more scrutiny of the funds.

The disagreement has now lead to delay in payments. As per Bloomberg, payment for about four to five cargoes had recently been delayed because the parties involved failed to agree on the currency of exchange.