Currency Issues Complicate Russian Oil Buying

Russia has been struggling with certain buyers of its oil to move currencies away from the US dollar, particularly with India according to Reuters sources.

• Indian buyers have been trying to settle trade for Russian oil this year in rupees as an alternative, but Russia has limited opportunities to spend the currency because its imports from the country are limited. Due to increased energy buying, the trade deficit is only widening further.
• Russia threatened to reroute cargoes this summer because of a push by Indian buyers to pay in rupees. Instead, the impacted cargoes were settled in Chinese yuan, the Hong-Kong dollar and the UAE dirham according to Reuters sources.
• “India encourages rupees to be spent on its territory and has imposed punitive exchange rates on converting rupees into other currencies, amounting on occasions to over 10% of the amount converted.” Reuters reported.
• Russian sellers have been encouraging Indian buyers to pay in Chinese yuan, something it is reluctant to do because of political differences.
• Instead, Indian buyers are trying to turn to UAE dirham but additional western sanctions have increased scrutiny as some UAE banks introduced compliance declarations recently.