India has taken a strong stance against using the Chinese Yuan for its oil payments to Russia. The issue arises from Russia's preference for the Yuan in exchange for its oil, creating a challenging situation for India due to its policy against using the Yuan

Introduction

India has been purchasing a significant amount of Russian oil in the past year. Russia's preference for the Yuan has created payment difficulties, prompting India to make some transactions in Yuan, including state-owned Indian Oil. However, the Indian government has now instructed state-owned refiners not to use the Chinese currency for payments.

Payment Challenge

India typically pays Russia using a combination of UAE dirhams, US dollars, and Indian rupees to work around the G7 cap on Russian oil purchases, allowing payments up to $60 per barrel

India's Usual Payment Method

Russia's imports from China have risen significantly, and using the Yuan benefits them for purchasing goods from China. The Yuan has become the most traded currency in Russia, surpassing the US dolla

Why Russia Prefers Yuan

India's reluctance to use the Yuan is influenced by the current border standoff with China over Arunachal Pradesh. India's decision is a response to not contribute to the internationalization of the Chinese currency.

India's Resistance to Yuan

While the oil supply remains stable, there have been reports of delays in around seven cargos due to payment method uncertainties. This issue could pose problems for India, as Russia is now its largest oil supplier

Impact on India's Oil Trade

China has not officially reacted, but the Global Times, a state media outlet, criticized India's decision, viewing it as ill-advised and likely to increase costs and disrupt normal operations.

China's Perspective

India's refusal to use the Yuan in oil deals with Russia is a reflection of its political tensions with China and concerns about the internationalization of the Chinese currency. This move presents challenges and emphasizes the need for India to boost its exports to make the Rupee more attractive on the global stage

Conclusion

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