Daily Management Review

India's Leading Cement Manufacturer Using Chinese Yuan To Pay For Russian Coal – Reuters


According to an Indian customs document reviewed by Reuters, UltraTech Cement is importing a cargo of Russian coal and paying in Chinese yuan, an uncommon payment method that dealers fear could become more widespread.
According to the document, UltraTech is bringing in 157,000 tonnes of coal from Russian manufacturer SUEK, which was loaded aboard the bulk carrier MV Mangas from the Russian Far East port of Vanino. It cites a June 5 invoice valuing the cargo at 172,652,900 yuan ($25.81 million).
According to insiders, the cargo was sold by SUEK's Dubai-based unit, and other companies have reportedly placed orders for Russian coal using yuan payments.
The growing use of the yuan to settle payments might help insulate Moscow from the consequences of Western sanctions placed on Russia for its invasion of Ukraine, as well as bolster Beijing's push to further internationalise the currency and chip away at the US dollar's dominance in global trade.
Because they are not permitted to speak to the media, the sources declined to be identified. SUEK and UltraTech did not make any comment.
"This move is significant. I have never heard any Indian entity paying in yuan for international trade in the last 25 years of my career. This is basically circumventing the USD (U.S. dollar)," a Singapore-based currency trader said.
The transaction demonstrates how, despite Western sanctions, India has maintained trading links with Russia for commodities such as oil and coal. India has long-standing political and security connections with Russia and has refrained from denouncing the Ukraine strike, which Russia describes as a "special military operation."
It was unclear which bank opened a letter of credit for UltraTech or how the transaction with SUEK was carried out. SUEK did not respond to an inquiry for comment.
According to ship-tracking data on Refinitiv Eikon, the Mangas is now anchored near the Indian port of Kandla.
India has considered establishing a rupee payment method for commerce with Russia, although this has not yet occurred.
For years, Chinese enterprises have used the yuan in trade settlements with Russia.
For Indian trade settlements using the yuan, lenders may be required to transmit dollars to branches in China or Hong Kong, or Chinese banks with which they have tie-ups, in return for yuan to settle the deal, according to two top Indian bankers.
"If the rupee-yuan-rouble route turns out to be favourable, the businesses have every reason and incentive to switch over. This is likely to happen more," said Subash Chandra Garg, a former economic affairs secretary at India's finance ministry.
Even after a deadly military battle between the two in 2020, India's bilateral trade with China has prospered, while New Delhi has intensified scrutiny on Chinese investments and imports, and banned some mobile apps due to security concerns.
An Indian government official acquainted with the situation stated that the administration was aware of yuan payments.
"The 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.
According to Reuters, India's energy imports from Russia have increased in recent weeks as brokers have offered huge discounts. New Delhi defends its procurement of Russian commodities, claiming that an abrupt halt would cause price inflation and harm to customers.
Multiple coal traders operating in Russia, Singapore, India, and Dubai indicated that business units of Russian coal traders in Dubai have been active hubs for arranging agreements with India in recent weeks, as Singapore has grown concerned of irritating western nations that have imposed sanctions on Russia.
The most difficult task, according to a Russian coal merchant headquartered in Dubai, is moving roubles to Russia.
"You can either take payments in yuan in Dubai, or receive it in dollars or (Arab Emirates) dhiram and convert it to rouble" he said, adding it was easier to convert the yuan to rouble and was preferred over other currencies.