India’s biggest cement producer, UltraTech Cement, is importing a cargo of Russian coal and paying using Chinese yuan, according to an Indian customs document reviewed by Reuters said, a rare payment method that traders say could become more common.
UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that was loaded on the bulk carrier MV Mangas from the Russian Far East port of Vanino, the document showed. It cites an invoice dated June 5 that values the cargo at 172,652,900 yuan ($25.81 million).
Two trade sources familiar with the matter said the cargo’s sale was arranged by SUEK’s Dubai-based unit, adding that other companies have also placed orders for Russian coal using yuan payments.
The increasing use of the yuan to settle payments could help insulate Moscow from the effects of Western sanctions imposed on Russia over its invasion of Ukraine and bolster Beijing’s push to further internationalise the currency and chip away at the dominance of the US dollar in global trade.
"This move is significant. I have never heard of any Indian entity paying in yuan for international trade in the last 25 years of my career. "This is basically circumventing the USD (US dollar)," a Singapore-based currency trader said.
The sale highlights how India has maintained trade ties with Russia for commodities such as oil and coal despite the Western sanctions. India has longstanding political and security ties with Russia and has refrained from condemning the attack in Ukraine, which Russia says is a "special military operation."
India’s energy imports from Russia have spiked in the recent weeks as traders have offered steep discounts, Reuters reported last month. New Delhi defends its purchases of Russian goods, saying a sudden halt would inflate prices and hurt consumers.
Last month, Russia overtook Saudi Arabia to become India's second-biggest supplier of oil behind Iraq as refiners snapped up Russian crude available at a deep discount following the war in Ukraine, according to media reports.
Meanwhile, India has explored setting up a rupee payment mechanism for trade with Russia, but that has not materialised. Chinese businesses have used the yuan in trade settlements with Russia for years.
For Indian trade settlements using the yuan, lenders would potentially have to send dollars to branches in China or Hong Kong, or Chinese banks they have tie-ups with, in exchange for yuan to settle the trade, two senior Indian bankers said.
"If the rupee-yuan-rouble route turns out to be favourable, the businesses have every reason and incentive to switch over." "This is likely to happen more," said Subash Chandra Garg, a former economic affairs secretary at India’s finance ministry.