India’s biggest cement producer is to pay for a $26 million cargo of Russian coal with Chinese yuan.
In what could be a groundbreaking move, UltraTech Cement’s purchase could help insulate Moscow from the effects of western sanctions imposed on Russia over its invasion of Ukraine if others follow its lead.
It could also bolster Beijing’s push to further internationalise its currency and chip away at the dominance of the US dollar in global trade.
UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK, according to an Indian customs document reviewed by Reuters. 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 sources declined to be identified as they are not authorised to speak to the media. UltraTech and SUEK did not respond to a request seeking comment.
“This move is significant,” a Singapore-based currency trader said. “I have never heard any Indian entity paying in yuan for international trade in the last 25 years of my career. This is basically circumventing the [dollar].”
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-Russia Rupee Payment Plan
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.
India’s bilateral trade with China, for which companies largely pay in dollars, has flourished even after a deadly military clash between the two in 2020, though New Delhi has increased scrutiny on Chinese investments and imports, and banned some mobile apps over security concerns.
An Indian government official familiar with the matter said the government was aware of payments in yuan.
“The use of the yuan to settle payments for imports from countries other than China was rare until now, and could increase due to sanctions on Russia,” the official said.
India’s energy imports from Russia have spiked in the recent weeks as traders have offered steep discounts. New Delhi defends its purchases of Russian goods saying a sudden halt would inflate prices and hurt consumers.
- Reuters with additional editing by Sean O’Meara