Russian oil exports to India settled in Yuan, HK Dollar & UAE Dirhams
ALBAWABA – India has been insisting on settling Russian oil bills in rupees, a non-convertible currency with little value outside of Indian markets, instead of the US Dollar, Reuters reported Monday.
Unnamed sources told Reuters that Russian exporters threatened to divert nearly a million tons of oil to other markets if Indian importers do not fulfil their payments in US dollars.
India, which has become Russia's top oil market after Europe shut its doors, insisted in July on paying rupees and trade between the two countries almost fell apart, according to the Reuters exclusive.
The problem for Russia is that imports from India are insignificant, an unnamed source said, which is why the Russian central bank generally does not encourage trade settlement in Rupees.
Apart from India, there are no other countries with whom Russia can settle trade in Rupees. This is why the central bank will not accept the currency.
As a temporary solution, the cargoes in July were paid for in a combination of the Chinese yuan, the Hong-Kong dollar as a transition currency into the yuan and the UAE dirham, which is pegged to the US dollar, multiple trading and official sources confirmed to Reuters.
India is pushing to pay for Russian oil imports in Rupees instead of US dollar - Shutterstock
Finding a viable alternative to the dollar is an important issue for buyers in Africa, as well as in China, India and Turkey, which have become top buyers of Russian oil.
The biggest issue, however, concerns India, which has been buying more than 60 percent of seaborne Russian oil, according to LSEG data and Reuters calculations. It is the second biggest overall buyer of seaborne Russian crude, after China.
So far, less than 10 percent of Russia's output of roughly 9 million barrels of oil per day (bpd) is sold in dollars and euros, traders have confirmed to the Canada-based news agency.
The Russian central bank cannot operate in dollars because of sanctions. Likewise, while Russian exporters theoretically can use the currency, avoiding it makes it harder for the United States (US) and other Western governments to monitor their trade.
Alternatively, nonetheless, trading in other currencies makes it a bit more complicated. Especially if there is a trade imbalance between the parties to a trade deal.
India exports to Russia tumble, making payment for Russian oil in Rupees difficult
India, earlier this year, owed Russia about $40 billion for oil and other supplies, multiple trading and banking sources told Reuters.
Overall, India’s imports from Russia reached $30.4 billion in April-September, according to the data posted on the Indian commerce ministry website. Meanwhile, exports to Russia have fallen to $2 billion, compared to around $13.4 in the same duration a year before.
This means that the trade deficit has been widening, now at around $28.4 billion for the said duration, which makes it that much more difficult for Russian traders to accept payments in Indian rupees. As there are no imports from India that can be paid for in the Indian currency.
As a solution, Russian officials and oil executives have pressed Indian buyers to pay in the Chinese yuan, which for Russia is a more useful currency. But for India, using the currency of a regional rival is a highly sensitive issue.
Russian oil has been sanctioned by the US since Russia invaded Ukraine - Shutterstock
Private refiners have switched back to the yuan due to the lack of other options since the clash earlier this year, the sources said, but India is still pushing and a solution is pertinent.
Indian state refiners have turned to the UAE dirham, but that has been complicated by additional clearing requirements as Washington's tougher line makes other governments wary, Reuters reported.
From October, several UAE banks have tightened control over clients with Russia-focused transactions to ensure compliance with the price cap, sources told the news agency.
At least two UAE banks have introduced price cap compliance declarations for the clients involved in Russian crude, oil products and commodity trading, they said, though they declined to name the banks.
