India has asked banks and traders to avoid using Chinese RMB Yuan to pay for Russian imports, three government officials involved in policy making and two banking sources said, because of long-running political differences with its neighbor.
India, which has emerged as a top buyer of Russian oil as well as discounted coal, would prefer the use of United Arab Emirates Dirhams to settle trade, stating that New Delhi is “not comfortable” with foreign trade being settled in RMB Yuan but said settlement in “Dirham is okay.”
The unofficial position is that India cannot allow settlement in RMB Yuan till the relations between India and China improve.
Indian oil refiners have also started settling some Russian oil purchases in Russian Rubles, with payments processed in part by the State Bank of India via its Vostro Rubles account in Russia.
However, the bulk of this trade is still in other currencies as the Ruble is partially convertible and the two countries are yet to finalize a framework.
The move however indicates general unhappiness and a lack of trust in the US dollar and Euro, with that sentiment increasingly spilling over to Asian currencies. The emergence of the RMB Yuan is of no surprise and will be managed by most countries, however the positioning of the UAE Dirham as a ‘reserve’ to the RMB Yuan is an interesting development.
Related Reading
Direct Indian Rupee – UAE Dirham Trade Settlement Available Soon
