December 1, 2023 8:16 AM

India doesn’t want its state refiners to pay for Russian oil in Chinese yuan? Some payments held up, says report

The Indian government’s reluctance to permit state-controlled refiners to pay for Russian oil imports with Chinese currency has led to payment delays for at least seven shipments, sources familiar with the matter told Reuters. Despite the payment dispute, Russian companies like Rosneft continue to provide oil to Indian refiners. India has become the leading importer of Russian seaborne oil this year, taking advantage of discounted prices following the suspension of Russian oil imports by some Western nations due to the Ukraine conflict, the report said.
The issue arises when refiners encounter difficulties settling their trade with Moscow, given the price cap of $60 a barrel imposed by the United States and the European Union on Russian oil. To navigate this cap, buyers have turned to alternatives such as Emirati dirhams for cargoes exceeding the limit as oil prices rise.
In July, it was reported that Indian refiners began using Chinese yuan for some Russian oil payments while continuing to use dollars and dirhams for most of their Russian oil purchases. However, the Indian government has expressed discomfort with using yuan for payments, the report quoted two finance ministry officials saying. Officials at affected refiners have noted that payment for at least seven shipments is still pending, some of which have been outstanding since late September.
It remains unclear whether the government explicitly instructed state refiners to cease using yuan, but it is evident that New Delhi does not approve of this practice. A government official stated that while it is not prohibited, the government neither encourages nor facilitates such trade.

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Most of the Russian oil purchased by Indian refiners comes from traders, with some direct purchases from Russian entities. While traders have been willing to negotiate deals in dirhams, Russian sellers have insisted on yuan.
State-run Indian Oil Corp has previously used yuan and other currencies to pay for Russian oil. Bharat Petroleum Corp and Hindustan Petroleum, which have not used yuan for payments until now, have also been requested by Russian suppliers to settle in Chinese currency.
Private Indian refiners, on the other hand, have continued to use yuan and other currencies for Russian oil imports, with majority of Indian purchases of Russian oil settled in dirhams. However, paying in yuan adds extra conversion costs as rupees must first be converted to Hong Kong dollars and then to yuan, incurring an additional 2-3% cost compared to settling in dirhams.
Indian Oil, Bharat Petroleum Corp, Hindustan Petroleum, and the country’s oil and finance ministries have not responded to requests for comments by Reuters. Indian state refiners would prefer to use rupees for Russian oil payments, but Russia is less inclined to accept rupees given the trade balance that favors Moscow.
Some in India view using yuan as a benefit to China, which is a concern given the strained relationship between the two countries after a border clash in 2020 resulted in casualties on both sides.

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