With Russian exporters showing preference to be paid in yuan, India’s trade with Russia in Chinese currency is gathering pace to tide over the payment crisis between countries since the start of the Ukraine war in February 2022.
Two sources, who are in the know of things, said this payment mechanism is being run through global financial centres like Singapore and Dubai.
With the imposition of Western sanctions on Russia following the Ukraine war, Russia has been redirecting most of its energy exports to Asia, and of them, most are being bought by China. While Russia and China have been able to settle their trade in yuans and rubles, India has been struggling to figure out a smooth mechanism to continue its trade with Russia.
Due to the greater acceptability of the yuan in global markets, Russian exporters are happy being paid in yuan by Indian traders, one of the two sources quoted above said, on the condition of anonymity.
With this development, India’s efforts to push the rupee in global trade have taken a hit. In particular, India has not been able to convince Russia to accept its payments in rupees, as the trade deficit between the two countries swelled sevenfold in the last fiscal year alone, crossing $40 billion.
There were reports about five days back (on October 20) that the Narendra Modi government had rejected requests from Russian exports to make transactions in yuan. The Indian government’s unease over letting state-controlled refiners pay in Chinese yuan for massive Russian oil imports had “held up the payment for at least seven cargoes“, as on October 17.