India wants foreign trade settlement in UAE dirham with Russia, discourages Chinese yuan

Gulf Today Report

Three government officials involved in policy making and two banking sources said India had asked banks and merchants to avoid using the Chinese yuan to pay for Russian imports.

The three government officials said that India, which has become the largest buyer of Russian oil as well as low-priced coal, prefers to use the UAE dirham to settle trade deals.

One of the government officials directly involved in the matter stated that New Delhi was "not comfortable" with the settlement of foreign trade in yuan, but said the settlement in dirhams is "okay."

The second official stated that India cannot allow the settlement of trade exchanges in yuan until relations between the two countries improve.

The five officials did not say whether there were any economic reasons behind India's reluctance to accept settlement in yuan.

Two well-informed banking officials said: The Reserve Bank of India (the central one) does not favor the settlement of foreign trade in the yuan, and confirmed that the government discourages them from using that currency.

They also said: Russia prefers settlement in yuan, because it helps it buy goods from China.

In the past few weeks, Indian refiners have begun settling some Russian oil purchases in rubles, according to Reuters.

But the bulk of trade is still in other currencies; The ruble is partially convertible and the two countries have yet to finalize the framework.

The five officials declined to be named because the discussions are confidential. India's foreign and finance ministries and the Reserve Bank of India did not respond to requests for comment.

The first official said the government expects most payments to Russia to be in dirhams in the coming months.

India has long-standing political and security relations with Russia, and has refrained from condemning the Ukrainian war.