Oil refiners from India using CNY to buy Russian crude

Indian refiners are starting to purchase Russian crude imports using the Chinese yuan (CNY), as Western sanctions continue to redefine global currency usage.

Although India does not officially recognize the West’s measures against Russia for its war on Ukraine, the fear of potential secondary sanctions has made Indian banks wary of using US greenbacks for Russian imports.

In June, Indian Oil was the first state refiner to pay for Russian crude in yuan, while at least two of India’s three private refiners have completed similar transactions.

Previously, India had requested banks to avoid the yuan’s use in Russian transactions, due to the geopolitical friction New Delhi has maintains with Beijing. Whether this has changed is unclear.

It is reported that two more state refiners, Bharat Petroleum and Hindustan Petroleum, are also considering the yuan’s use, as a way to widen currency alternatives.

The US dollar is typically used in international oil transactions. In India, most payments are in dollars and United Arab Emirates dirhams. But fears of currency risks have prompted importers to seek other options, sources told Bloomberg.

Indian efforts to allow the rupee to be used for oil purchases have largely been futile, with Moscow unable to convert the large rupee stockpile it currently sits on.

Meanwhile, the curtailment of Moscow’s energy exports to the West rerouted them to new markets at discounted prices, benefitting countries such as India and China.

In fact, Russian imports into India jumped for a 10th straight month in June, hitting a record 2.2 million barrels a day, according to Kpler.

The increased adoption of the yuan is good news for Beijing, which has been actively pushing for the currency’s role in cross-border trade agreements, in a gradual effort to unseat the dollar. The yuan has also brought some relief to Russia, which relies on the currency to circumvent Western measures.

While a large part of China’s own energy trade with Russia has been yuan-denominated, last month also saw Pakistan pay for Moscow crude in the currency.