India, Russia, & China Would Benefit From India Using Yuan To Purchase Some Russian Oil

This would help India counteract US pressure, avert the scenario of Russia becoming disproportionately dependent on China, and further improve Sino-Indo ties.

Reuters reported in early October that some Russian oil traders have once again begun requesting yuan from Indian state refiners, thus resuming a practice that was briefly in effect during mid-2023 following the example set by India’s top cement maker reportedly buying Russian coal with yuan the year prior. India reportedly rejected Russia’s request in late 2023 to continue this practice due to tensions with China, but three interconnected developments might soon change Delhi’s calculations.

The most pivotal among these is worsening Indo-US ties brought about by Trump’s obsession with punishing India for refusing to boycott Russian arms and energy, which he’s demanded of it per the US’ plot to derail India’s rise as a Great Power and instead subordinate it as the US’ largest-ever vassal state. This led to a thaw in Sino-Indo tensions that stemmed from summer 2020’s lethal clashes over the Galwan River Valley, which saw Prime Minister Narendra Modi attend last month’s SCO Summit in China.

At the same time, however, the worsening of Russian-US ties during the same period led to Russia clinching the long-negotiated Power of Siberia 2 gas pipeline deal with China at what many believe to be China’s terms, which would increase Russian dependence on China if true. That speculation is sensible enough since it’s more likely that Russia agreed to China’s reportedly proposed lower prices after ties with the US deteriorated than China finally agreeing to Russia’s reportedly proposed higher ones.

From India’s perspective, despite its warming ties with China, increasing Russian dependence on China could lead to China leveraging its influence over Russia to get Russia to curtail the export of arms, ammo, and spares to India for decisively giving China an edge in their Himalayan border dispute. India must therefore carefully balance between Russia and China, all three of which form the RIC core of BRICS and the SCO, in order to avert this scenario, further improve ties with China, and counteract US pressure.

To that end, resuming the purchase of some Russian oil with yuan would more effectively counteract US pressure on India over this issue, maintain India’s large-scale import of this resource that enables India to serve as an important valve from Western pressure for Russia, and improve ties with China. Through these means, the US’ latest pressure is partially mitigated, Russia’s Sino-Indo balancing act won’t be disrupted all that much by Power of Siberia 2, and China’s trust in India could increase as well.

Having explained how all three would benefit through such an arrangement, it’s important to clarify that Russia confirmed that most Indian payments are still in rubles, with the yuan only being used on a small scale. Both sides might therefore prefer this over using more yuan. Continued Indian suspicions of Chinese intentions this early on in their rapprochement, which is natural, could also impede this proposal. Another possibility is India using more dirhams than yuan in non-ruble and -rupee purchases.

Nevertheless, the point is that there’s a credible possibility that India might once again resume using the yuan for at least some Russian oil purchases, which would accelerate the reconsolidation of RIC as the core of BRICS an the SCO and advance all three’s unofficial de-dollarization agenda. It’s ultimately India’s call whether to go through with this proposal, and to what extent if so, but it’s worth policymakers reflecting upon its benefits since they arguably outweigh whatever concerns some might still have.