- Russian oil suppliers are requesting payment in yuan, but India is refusing to comply, according to sources involved in the negotiations.
- India’s government-owned refiners would require payment instructions from the Ministry of Finance, which hasn’t approved yuan payment requests.
- India’s use of dirhams as the primary unit of transaction for oil trade may cause delayed payments and affect the country’s efforts to internationalize its currency.
India’s relationship with Russia is complicated by the latter’s demand for payment in yuan for crude imports, which India rejects to do. Russian oil suppliers are struggling to use their excess supply of rupees, while demand for yuan has grown due to China’s economic reliance on Russia. The Chinese currency has replaced the US dollar as the most traded currency in Russia. Indian refiners mostly pay for Russian oil imports in dirhams, US dollars, and a small amount of rupees. Russia’s demand for yuan as the main unit of transaction for oil trade may cause delayed payments, as the parties involved have failed to agree on the currency of exchange. The use of dirhams as the primary unit of transaction for oil trade may affect India’s efforts to internationalize its currency, and may cause a backlash against Prime Minister Narendra Modi and his government in the upcoming elections.