Indian refiners including the Indian Oil Corp (IOC) have started settling payments for oil with China using the Chinese Yuan. The oil was procured from Russia and India isn’t allowed to do business with the country due to U.S. sanctions. The Biden administration pressed economic sanctions against Russia for invading and waging war with its neighboring country Ukraine.
Since Moscow is not allowed to trade in the U.S. dollar, the Putin-led government is laundering oil through Saudi Arabia and China. The recent oil deal was carried out between Russia, China, and India, which are part of the BRICS alliance.
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BRICS: India Pays For Oil With Chinese Yuan & Not the U.S. Dollar
The sanctions against Russia have helped India procure crude oil and coal imports at discounted prices. Therefore, the country aggressively purchased oil and coal since February 2022. India imported 2.17 million barrels per day in June 2023, which is 15% higher than in April, when it imported 1.96 million barrels a day. IOC settled the payment with China through ICICI Bank for the Russian Oil from Rosneft.
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The Indian Oil Corp is the country’s biggest buyer of Russian crude oil. IOC is now the first state-run refiner to pay in the Chinese Yuan and not the U.S. dollar. “Some refiners are paying in other currencies like Yuan if banks are not willing to settle trade in Dollars,” said an Indian government source to Reuters.
The other leading refineries in India are also considering settling transactions using the Chinese Yuan, reported Bloomberg. Also, Hindustan Petroleum Corp and Bharat Petroleum Corp are considering ditching the U.S. dollar and paying in Chinese Yuan.
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The U.S. sanctions are helping the BRICS alliance find alternative currencies to settle cross-border transactions. The development puts the U.S. dollar under pressure and gives BRICS an undue advantage in global trade.
BRICS is an acronym for Brazil, Russia, India, China, and South Africa. The next BRICS summit will be held in August in South Africa and the formation of a new currency will be decided.