India’s largest cement producer, UltraTech Cement, is importing a shipment of Russian coal and paying in Chinese yuan, according to an Indian customs document reviewed by Reuters, a rare payment method that traders say could become more common.
UltraTech is bringing 157,000 tonnes of coal from Russian producer SUEK which was loaded onto the bulk carrier MV Mangas from the Russian Far East port of Vanino, according to the document. He cites an invoice dated June 5 that values the shipment at 172.65 million yuan ($25.81 million).
Two trade sources familiar with the matter said the sale of the cargo was arranged by SUEK’s Dubai-based unit, adding that other companies had also placed orders for Russian coal using yuan payments.
The growing use of the yuan to settle payments could help shield Moscow from the effects of Western sanctions imposed on Russia following its invasion of Ukraine and bolster Beijing’s efforts to further internationalize the currency and reduce US dollar dominance. in world trade.
The sources declined to be identified as they are not authorized to speak to the media. UltraTech and SUEK did not respond to a request for comment.
“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,” said a Singapore-based forex trader. “It’s basically around the USD (US dollar),” the trader added.
The sale shows how India has maintained trade ties with Russia for products such as oil and coal despite Western sanctions. India has a long-standing political and security relationship with Russia and has refrained from condemning the attack in Ukraine, which Russia calls a “special military operation”.
It was not immediately clear which bank opened a letter of credit for UltraTech and how the transaction with SUEK was executed. SUEK did not respond to a request for comment.
The Mangas is currently at anchor near the Indian port of Kandla, according to ship tracking data on Refinitiv Eikon.
India has explored setting up a rupee payment mechanism for trade with Russia, but this has not materialized. Chinese companies have been using the yuan in trade deals 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 to Chinese banks with which they have ties, in exchange for yuan to settle the trade, two said. senior Indian bankers.
“If the rupee-yuan-ruble route proves favorable, businesses have every reason and incentive to change course. This is likely to happen more,” said Subash Chandra Garg, former secretary for economic affairs at India’s ministry. finances.
India’s two-way trade with China, for which companies largely pay in dollars, has flourished even after a deadly military clash between the two in 2020, although New Delhi has tightened surveillance on Chinese investment and imports. and prohibits certain mobile applications for security reasons.
An Indian government official with knowledge of the matter said the government was aware of the yuan payments.
“The use of the yuan to settle payments for imports from countries other than China has been rare until now and may increase due to sanctions against Russia,” the official said.
India’s energy imports from Russia have surged in recent weeks as traders offered deep discounts, Reuters reported this month. New Delhi is defending its purchases of Russian products, saying a sudden halt would inflate prices and hurt consumers.
The business units of Russian coal traders in Dubai have become active hubs for facilitating deals with India in recent weeks, as Singapore has been wary of provoking Western nations that have invoked sanctions against Russia, said several coal traders based in Russia, Singapore, India and Dubai. .
A Dubai-based Russian coal trader said the biggest challenge was sending rubles to Russia.
“You can either accept payments in yuan in Dubai or receive them in dollars or dhiram (from the Arab Emirates) and convert them into rubles,” he said, adding that it was easier to convert yuan. in ruble and that it was preferred to other currencies.