According to this Reuters report, trading houses supplying Russian crude oil have started requesting Indian state-owned refiners to settle payments in Chinese yuan. The shift reflects traders’ efforts to simplify the transaction process with Indian buyers amid signs of a gradual thaw in India–China relations, according to industry sources.

India’s largest state refiner, Indian Oil Corporation (IOC), has recently completed two to three payments for Russian oil consignments in yuan, people familiar with these transactions revealed. IOC’s switch to yuan marks the first such move in more than a year, highlighting a pragmatic approach to navigating payment obstacles created by Western sanctions on Moscow. The company has not officially commented on the matter.

Following Russia’s 2022 invasion of Ukraine, Western sanctions restricted Moscow’s access to the global dollar-based financial system. This prompted a wider shift toward alternative settlement currencies such as the Chinese yuan and the UAE dirham. These currencies have been increasingly used in oil trade channels previously dominated by the dollar, especially in dealings with Russia.

In 2023, Indian state refiners had briefly used yuan for settling Russian crude purchases. However, the Indian government discouraged such transactions during a period of strained diplomatic relations with Beijing. While state entities halted yuan settlements, private refiners continued using the Chinese currency for Russian oil imports through intermediary traders.

Previously, traders dealing with Indian refiners converted payments from dirhams or dollars into yuan before transferring funds to Russian producers in roubles. This multi-step conversion raised costs and slowed settlements. By allowing direct yuan payments, traders aim to eliminate an expensive conversion layer and streamline the overall payment process.

Sources indicated that traders are continuing to price Russian oil in U.S. dollars to remain compliant with the European Union’s price cap mechanism. However, they are seeking equivalent payments in yuan, ensuring buyers meet sanctioned trade conditions while maintaining flexibility in currency settlements.

Since Western governments restricted crude imports from Russia, India has emerged as Moscow’s largest seaborne oil customer. The consistent flow of discounted Russian crude has strengthened India’s energy security and offered significant cost advantages. Allowing yuan-based settlements would further expand supply access, as some traders currently refuse payments in non-convertible currencies.

The renewed use of yuan in India’s energy trade coincides with visible improvements in bilateral diplomacy. India and China recently reinstated direct flights after a five-year suspension.

Moreover, Prime Minister Narendra Modi’s visit to China in August 2025 for the Shanghai Cooperation Organisation (SCO) summit marked the first such engagement in seven years. Both nations pledged to advance relations on pragmatic and non-confrontational terms, potentially opening doors for deeper economic cooperation.

Adopting yuan settlements offers a short-term advantage for ensuring continuous Russian oil supplies amidst global payment disruptions. However, it also introduces a delicate strategic balancing act for New Delhi, which must weigh economic pragmatism against geopolitical considerations involving both Beijing and Western allies. The growing acceptance of non-dollar trade mechanisms could signal a gradual recalibration of global energy finance norms centred away from dollar dominance.

Based On Reuters Report