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Thursday, June 1, 2023

India hopes to conduct foreign trade settlements with Russia in UAE dirhams, and discourages the use of renminbi

This photo has been used for illustration purposes.

gulf today report

India has asked banks and merchants to avoid using yuan to pay for Russian imports, three government officials and two banking sources involved in policymaking said.

India, which has become the biggest buyer of Russian oil and cheap coal, prefers to settle trade deals in the United Arab Emirates dirham, three government officials said.

A government official directly involved in the matter said New Delhi was “not happy” with foreign trade settlements in yuan, but said it was “okay” in dirhams.

The second official said India cannot allow trade transactions to be settled 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 yuan settlements.

Two well-informed banking officials said: The Reserve Bank of India (central bank) is not in favor of using RMB to settle foreign trade and confirmed that the government does not encourage them to use RMB.

They also said that Russia prefers settlements in yuan because it helps it buy goods from China.

Over the past few weeks, Indian refiners have begun settling some Russian oil purchases in rubles, Reuters reported.

But most trade remains in other currencies; the ruble is partially convertible and the two countries have yet to finalize a framework.

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

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

India has longstanding political and security ties with Russia and has not condemned the Ukraine war.

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