Indian refiners are increasingly settling purchases of Russian oil in alternative currencies, according to people familiar with the matter, as they seek to reduce reliance on the dollar amid rising geopolitical tensions and shifts in US policy.
Transactions are being carried out by depositing Indian rupees into special overseas bank accounts held by Russian sellers which are then being converted into UAE’s dirham or the Chinese yuan, the people said, who asked not to be identified because the information is private. Some Indian banks with limited offshore presence are facilitating the trades, they said.
While the US earlier this month granted India a waiver to ramp up purchases of Russian oil, it is set to expire on April 11. Ahead of that deadline, some Russian oil firms are pushing for more durable arrangements, seeking payment in alternative currencies to limit exposure to shifting US policy.
India’s Finance Ministry did not immediately respond to a Bloomberg News email seeking comment.
The shift comes as Indian firms ramp up oil purchases following massive supply disruption caused by the conflict in Iran, which has driven global crude prices over $100 a barrel. Refiners in the South Asian nation, including Indian Oil Corp. and Reliance Industries Ltd, have purchased about 60 million barrels of Russian oil since the US issued the waiver.
In addition to the dirham and yuan, firms are also considering the Singapore dollar and Hong Kong dollar, though transactions depend on individual banks’ comfort levels, one of the people added.
In a note on Tuesday, Deutsche Bank said the conflict is testing the dollar’s role as the currency for global oil trade, with one long-term consequence being a potential shift toward the yuan.
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