Full Breakdown
India Resumes Yuan Payments for Russian Oil Amid Thawing Relations with China
10/8/2025, 10:28:38 PM
Shift to Yuan Payments
Indian state refiners, particularly Indian Oil Corporation (IOC), have resumed payments for Russian oil in Chinese yuan, a significant development reported by multiple sources on October 7 and 8, 2023. This shift comes after a pause in yuan transactions earlier in the year, attributed to heightened tensions between India and China. The renewed use of the yuan reflects a broader trend of de-dollarization in international trade, particularly in the context of Western sanctions imposed on Russia following its invasion of Ukraine in 2022.
Background on Trade Dynamics
Since the onset of the Ukraine conflict, Russia has increasingly sought alternative currencies for its oil trade, moving away from the U.S. dollar. The yuan has emerged as a preferred currency, particularly for transactions with Indian refiners, who have become major buyers of discounted Russian crude oil. Reports indicate that Russian oil now constitutes approximately 40% of India's crude oil imports, a dramatic increase from less than 1% prior to the war. This shift has reportedly saved India around $17 billion.
Improving India-China Relations
The decision to resume yuan payments coincides with signs of improving relations between India and China. Recent diplomatic activities, including Indian Prime Minister Narendra Modi's visit to China for the Shanghai Cooperation Organisation summit and the resumption of direct flights between the two nations, have facilitated this economic shift. Traders are now leveraging these warming ties to streamline transactions, eliminating the need for complex currency conversions that previously involved multiple steps.
Implications for Oil Trade
The transition to yuan payments is expected to simplify financial transactions for Indian refiners. Previously, traders had to convert payments from dollars or UAE dirhams into yuan before settling in rubles, which increased costs and complexity. By paying directly in yuan, Indian refiners can enhance their access to Russian oil, as some suppliers prefer this currency over others. Despite this shift, prices for Russian oil continue to be quoted in U.S. dollars to comply with the European Union's price cap, with payments made in yuan at the equivalent exchange rate.
Criticism & Opposition
Despite the economic rationale behind this shift, some critics express concern over the geopolitical implications of deepening ties with China, particularly in light of past tensions. The Indian government had previously halted yuan payments due to political sensitivities, reflecting the delicate balance New Delhi seeks to maintain in its foreign relations.
Verbatim Quotes
- “According to the report, the use of yuan enables smoother transactions with Russian suppliers, especially as some traders have begun rejecting payments in other currencies.” — Trade Source
- “Experts believe that this approach will facilitate India’s access to Russian oil, especially given that not all traders are willing to work with less stable or politically sensitive currencies.” — Industry Expert
What's Next
As India continues to navigate its energy needs amid global sanctions and shifting geopolitical landscapes, the ongoing use of yuan for Russian oil transactions may set a precedent for future trade agreements. The implications of this economic strategy will likely unfold as India reassesses its relationships with both Russia and China in the coming months.
