India’s top cement maker pays for Russian coal in Chinese yuan

India’s largest cement producer, UltraTech Cement, is importing a shipment of Russian coal and paying with Chinese yuan, according to an Indian customs document reviewed by Reuters, an unusual payment method that traders say could be made more common.

UltraTech is bringing in 157,000 tonnes of coal from Russian producer SUEK that it loaded onto the bulk carrier MV Mangas from the Russian port of Vanino, according to the document. It cites an invoice dated June 5 that values ​​the shipment at 172,652,900 yuan ($25.81 million).

Two business sources familiar with the matter said the sale of the cargo was arranged by SUEK’s Dubai-based unit, adding that other companies have also placed orders for Russian coal using yuan payments.

The growing use of the yuan for payments could help Moscow shield itself from the effects of Western sanctions imposed on Russia over its invasion of Ukraine and bolster Beijing’s push to further internationalize the currency and reduce the US dollar’s dominance in the world. world trade.

The sources declined to be identified because they were not authorized to speak to the media. UltraTech and SUEK did not respond to 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. This is basically bypassing the USD (US dollar),” said a Singapore-based forex trader.

The sale shows that India has maintained trade ties with Russia for commodities such as oil and coal despite Western sanctions. India has long-standing political and security ties with Russia and has refrained from condemning the attack in Ukraine, which Russia says is 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 anchored near the Indian port of Kandla, according to ship tracking data from | Refinitiv Eikon.

Trade between India and China

India has explored the possibility of establishing a rupee payment mechanism for trade with Russia, but it has not materialized. Chinese companies have used the yuan for years in trade settlements with Russia.

The growing use of the yuan to make payments could help Moscow shield itself from the effects of Western sanctions imposed on Russia over its invasion of Ukraine.

For Indian trade settlements using the yuan, lenders would have to send dollars to Chinese or Hong Kong branches, or Chinese banks with which they have ties, in exchange for yuan to settle the trade, two senior Indian bankers said.

“If the rupee-yuan-ruble route turns out to be favorable, companies have every reason and incentive to switch. This is likely to happen more often,” said Subash Chandra Garg, a former secretary for economic affairs at the Indian Ministry of Finance.

India’s bilateral trade with China, for which companies pay mostly in dollars, has flourished even after a deadly military clash between the two in 2020, although New Delhi has increased scrutiny of Chinese investments and imports and banned some mobile applications for security reasons.

An Indian government official familiar with the matter said the government was aware of the yuan payments.

“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 crude oil imports in May increase by 13.4% year-on-year

India’s energy imports from Russia have soared in recent weeks as traders offered deep discounts, Reuters reported this month. New Delhi defends its purchases of Russian products by saying a sudden halt would inflate prices and hurt consumers.

India has explored the possibility of establishing a rupee payment mechanism for trade with Russia, but it has not materialized.

Russian coal traders’ business units in Dubai have become active hubs for facilitating deals with India in recent weeks, as Singapore has become wary of provoking Western nations that have invoked sanctions against Russia, they said. multiple coal traders based in Russia, Singapore, India and Dubai.

A Dubai-based Russian coal trader said the biggest challenge was shipping rubles to Russia.

“You can accept payments in yuan in Dubai, or receive it in dollars or dhiram (United Arab Emirates) and convert it to rubles,” he said, adding that the yuan was easier to convert to ruble and was preferred over other currencies.

(Reuters)

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