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India’s Message to Russia: No Deals in Yuan

India’s stringent policies have now extended to Russia. Over the past year, India has been purchasing a significant amount of Russian oil. However, the payment for these purchases has become a challenge. Russia has expressed a preference for payments in Yuan, the Chinese currency. This has put India in a difficult position due to its policy against using the Yuan.

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Despite the finance ministry’s caution against using the Yuan, some transactions were made in this currency. Even state-owned Indian Oil paid Russia in Yuan. However, this practice has now been halted. The Indian government has reportedly instructed refiners not to pay in Chinese currency. This directive applies only to state-owned refiners, which constitute around 70% of India’s refiners.

The Payment Conundrum- how does India usually pay Russia?

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India usually pays Russia through a mix of currencies – UAE dirhams, US dollars, and Indian rupees. This method is used to sidestep the G7 cap, which allows Russian oil purchases up to $60 per barrel. However, with current rates exceeding $80 per barrel, the difference is paid in other currencies like rupees and dirhams.

Why Does Russia Want the Yuan?

Russia’s imports from China have increased by 12.8%, amounting to around $76 billion. Having more Yuan benefits Russia as it can be used to purchase goods from China. In fact, the Yuan has now become the most traded currency in Russia, surpassing the US dollar.

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India’s Resistance Against the Yuan

India and China are currently engaged in a border standoff, with Beijing claiming Arunachal Pradesh land, that belongs to India. Given these circumstances, India is understandably resistant to using the Yuan and helping internationalize the Chinese currency.

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Impact on India’s Oil Trade

While supply has remained stable so far, reports suggest that around seven cargos have been delayed due to indecision over payment methods. If such issues persist, it could pose a problem for India as Russia is now its largest oil supplier.

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China’s Reaction

Although Beijing has not officially reacted, their state media outlet Global Times has criticized the Indian government’s decision as an ill-advised move that will increase costs and hamper normal operations.

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China thinks India is wrong of course they do. Beijing would love for India to start using the Yuan we are talking about one of the biggest importers in the world our total import Bill India’s total import bill is close to $900 billion so if India uses the Yuan it’s a boost for China which is why the government is pushing back but simply shunning the yuan is not enough it’s important to address this issue at its root, it is important for India to improve its exports drastically. Only then will the Rupee become a desirable currency on the international stage.

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