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Sources say that traders are seeking yuan payments from Indian state buyers who purchase Russian oil.

Sources in the trade said that traders offering Russian oil are now asking Indian refiners to make payments in Chinese Yuan. They see recent signs of improved relations between New Delhi, China and Beijing as an opportunity to simplify transactions with Indian buyers.

Indian Oil Corp, India's largest refiner and state-controlled company, paid in Chinese currency recently for two or three cargoes worth of Russian oil.

Indian Oil has not responded to the request for comment immediately.

Western sanctions against Russia following its invasion of Ukraine in 2022 have led to a greater use of alternative currencies such as the yuan or the dirham of the UAE for oil trade settlements. The dollar has long dominated these transactions.

Indian state refiners paid for Russian oil using yuan in 2023. However, they stopped doing so due to the Indian government's displeasure during a time of increased tensions with Beijing. Private refiners, however, continued to use Chinese currency.

One trader stated that traders who previously had to convert payments from dirhams and dollars to yuans, since they can only be exchanged directly into roubles to pay producers, are now looking to eliminate a costly step.

Sources said traders also priced Russian oil in US dollars to ensure compliance with the European Union price cap, and sought payment equivalent to yuan.

Due to sanctions, the West has stopped importing Russian oil. The sources stated that payments in yuan would increase the availability of Russian crude oil for Indian refiners as some traders refused to accept other currencies.

After a break of over five years, India and China resumed direct flights. Last month, Indian Prime Minister Narendra Modi travelled to China for the first time since 2007. He was there to attend the Shanghai Cooperation Organisation's regional security bloc.

(source: Reuters)