Russia has amassed billions of dollars in rupee-denominated assets due to its large trade surplus with India, but is struggling to use the funds. At the same time, Russian demand for the yuan has grown strongly over the past year as the Russian economy becomes increasingly dependent on China for imports. Russian companies have been transacting more of their trade in yuan, with the Chinese currency replacing the dollar as the most traded currency in Russia this year.
Indian refiners usually pay for Russian oil imports in dirhams, dollars and a small amount of rupees – if oil prices are above the $60 per barrel limit imposed by the US and its allies on Russian oil. While the yuan is sometimes used in smaller transactions, Russian oil suppliers are calling for the Chinese currency to become the main unit of transaction for oil trading, a senior government official said.
(Source: Bloomberg, Reuters)
India’s resistance to yuan transactions underlines India’s difficulty in balancing relations between Russia – a key economic ally – and China, a geopolitical rival. At the same time, relations between India and China have remained tense due to ongoing border disputes.
The government will not respond to these requests, the two people and two other government officials said. Nearly 70% of India’s refineries are government-owned, which means they must follow payment instructions from the Ministry of Finance.
Spokespeople for RBI, the Ministry of Finance and the Ministry of Petroleum and Natural Gas did not immediately respond to emails. Indian Oil, Bharat Petroleum and Hindustan Petroleum also did not respond.