Yuan gaining pace in India-Russia oil trade
The war between Russia and Ukraine has resulted in heavy sanctions with Russia seeking alternatives to the US dollar. This has coincided with India wanting to buy crude oil at a discount.
India’s crude oil imports from Russia are estimated to have hit a new record high of 2.2 million barrels per day in June, having risen in 10 consecutive months with it accounting for 40% of India's overall crude oil imports as compared to 16.5% last year.
While there was originally a push by the Indian government to settle trade with Indian rupees those negotiations fell short. One of the reasons for this given by the Russian government was that due to the lack of Imports from India.
Initially, India was using dirhams but that too was short-lived as Russia accumulated more dirhams than it could use.
Meanwhile, Chinese exports to Russia stood at over $33 billion Dollars in the first 3 months of 2023 as compared to the total trade between India and Russia in FY22-23 was just $39.8 billion dollars.
This shows that Russia would have more avenues to spend Yuan as compared to dirhams or rupees. However, given Indian-Chinese tensions and India's reluctance to settle trades in yuan, there was no public admission by either government that the trades would or are happening in yuan.
Despite these denials, some officials in the Russian government have anonymously stated that there are payments that are happening between India and Russia in yuan. Around 10% of the total payments so far have been happening in yuan.
India might be one of the most important trading partners alongside China. Despite the idea of creating a BRICS currency that has been floated around India has backed out rather than focusing on strengthening its own currency.
Kautilya, IBS Mumbai.