India refiners start yuan payments for Russian oil imports, say sources

Source: The post is based on the article “India refiners start yuan payments for Russian oil imports, say sources” published in The Hindu on 4th July 2023

What is the News?

Indian refiners have begun paying for some oil imports from Russia in Chinese yuan.

India as the largest buyer of seaborne Russian oil

India has emerged as a largest buyer of seaborne Russian oil. This is because Russia is selling oil at a discounted rate since the invasion of Ukraine.

Moreover, India being able to buy cheap Russian crude has boosted output and profits at Indian refineries. 

It has also enabled them to export refined products competitively to Europe and take a bigger market share.

How is India paying Russia for the oil?

The U.S. dollar has long been the main global oil currency, including for purchases by India.

But now the Chinese yuan is playing an increasingly important role in Russia’s financial system because Russia has been frozen out of the dollar and euro financial networks by international sanctions.

Indian Oil Corporation, the country’s biggest buyer of Russian crude oil, became the first state refiner to pay for some Russian purchases in yuan.

This rise in yuan payments has given a boost to China’s efforts to internationalize its currency, with Chinese banks promoting its use specifically for the Russian oil trade.