India’s state-run refiners have quietly started paying for Russian crude oil using Chinese yuan instead of the traditional US dollar, marking a notable shift in international energy trade. According to reports by Reuters and other sources, Indian Oil Corporation, the country's largest state-owned refiner, has completed payments in yuan for at least two or three recent shipments of Russian crude. This strategic move comes amid warming ties between New Delhi and Beijing and aims to simplify transaction processes linked to Russian oil imports.

Historically, oil deals have been predominantly settled in US dollars, a convention that has defined global energy markets for decades. However, the imposition of Western sanctions on Russia following its 2022 invasion of Ukraine has accelerated the adoption of alternative currencies such as the Chinese yuan and the UAE dirham for oil trade. Russian crude continues to be priced in US dollars to comply with the European Union's price cap, but the actual payments are increasingly settled in yuan. This approach removes an extra costly step where payments would previously undergo conversion from dollars or dirhams to yuan, which is then directly convertible into Russian rubles for producer payments.

The renewed use of yuan payments by Indian refiners is also a reflection of improving Indo-China relations, as calmer diplomatic ties have facilitated smoother economic collaboration. Earlier in 2023, Indian state refiners had started paying for Russian oil in yuan but pulled back amid heightened geopolitical tensions with China. Despite the fluctuating usage by state refiners, private Indian refiners continued to make payments in yuan during that period.

India has emerged as the world's largest buyer of discounted Russian crude oil since Western countries imposed embargoes and sanctions. Russian crude accounts for about 40% of India's total oil imports, a significant rise from less than 1% before the conflict in Ukraine. This shift has enabled India to save billions of dollars in import costs while ensuring a steady supply of energy.

Paying in yuan not only streamlines the payment process with Russian suppliers but also hints at a larger global economic trend towards de-dollarization. This development reflects a gradual move towards a multipolar currency system where alternatives to the US dollar gain increased traction, especially in regions seeking to navigate or sidestep Western economic sanctions.

India's adoption of yuan payments for Russian crude highlights pragmatism in global trade, balancing compliance with EU pricing mechanisms and leveraging geopolitical shifts. It underscores India’s evolving energy strategy amid global sanctions, currency realignments, and regional diplomatic recalibrations, as it continues to secure affordable energy resources for its growing economy.