India, which has become one of the biggest buyers of Russian crude oil and cheap coal, would prefer the UAE dirham over the Chinese yuan to settle trade, the Reuters from several sources.
The relationship between China and India has been conflictual for a long time, the two countries even have a border dispute with each other, but both states strive for a leading position in Asia. It is precisely for this reason that it is not at all surprising that New Delhi does not allow payments in yuan.
Last year, India’s largest cement maker UltraTech Cement used Chinese yuan for a shipment of Russian coal, raising concerns among officials as relations between India and China soured after deadly border clashes in Ladakh’s remote Galwan Valley in 2020, the news agency reported. Because of the UltraTech deal, trade in yuan has been highlighted and the Indian government and central bank may decide to ban settlement in the Chinese currency.
Two banking officials with knowledge of the matter told the news agency that the Reserve Bank of India (RBI) was not keen on foreign trade settlement in yuan and confirmed that the government had dissuaded them from using the currency. They also said that Russia was also interested in settling in yuan, as it would help them procure goods from China.
For Indian refiners, which in recent weeks have begun settling some of their Russian oil purchases in rubles, as reported by Reuters, payments have been made in part by State Bank of India through its ruble account in Russia.
However, most of the trade is still in other currencies, as the ruble is partially convertible and the two countries have yet to finalize the framework for the exchange rules.
The Indian government expects most payments to Russia to be made in dirhams in the coming months. The problem with the rupiah is that it must first be converted into dollars before it can be settled in another currency, which Moscow does not like for trade settlements.
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