India refuses to pay for Russian oil on Moscow's terms

Russia demands that India pay for Russian oil in yuan. However, Delhi does not want to pay for imports in the Chinese national currency. About it writes Bloomberg.

The government of Prime Minister Narendra Modi does not agree to these requests, and given that almost 70% of India's oil refineries belong to the state, they will have to comply with the payment instructions of the Ministry of Finance, - said in the article.

It is noted that until recently the Indian Oil Corporation, the largest state-owned refinery, used to pay in yuan for Russian oil, but the situation has changed dramatically.

The publication points out that behind the reluctance to switch to yuan is India's growing animosity towards China after a border skirmish in 2020 in which 20 Indian soldiers and four Chinese soldiers were killed.

Tensions between the two countries are rising," Bloomberg points out.

Also, the buyer in this case incurs unnecessary financial losses. Thus, according to representatives of the oil refining industry, settlements in yuan increase costs, as rupees have to be converted into Hong Kong dollars and then into yuan. This is 2-3 per cent more expensive than settling in dirhams.

At the same time, as the article points out, Russian oil suppliers continue to insist on payment in yuan. In particular, Russian oil suppliers are demanding that the Chinese currency be the main unit of transaction in oil trading.

The Indian government's inconvenience in settling payments for Russian oil imports in Chinese yuan has already delayed payments for at least seven cargoes.

Bloomberg explains that Moscow's interest in the yuan has grown significantly recently due to Russia's economy becoming dependent on the Chinese economy.

Russian businesses conduct most of their trade in yuan, with the Chinese currency replacing the dollar as the most traded currency in Russia this year, analysts point out.

Indian refiners now mostly pay for Russian oil imports in dirhams (the currency of the United Arab Emirates), American dollars and a small number of rupees if oil prices exceed the $60 per barrel limit.

Note that the European Union embargo on imports of offshore oil from Russia has been in place since December 2022. It has also imposed a price ceiling on Russian crude at $60 per barrel.

India has become the largest importer of Russian seaborne oil this year . Russian oil deliveries to India in January-May 2023 grew 11 times year-on-year to nearly 37 million tonnes. Russia also sells its oil to China.