U.S. Dollar and Chinese Yuan banknotes
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Summary

  • India has ramped up imports of Russian coal since the Ukraine war
  • June customs data shows non-dollar payments are now common
  • Chinese yuan, and Emirati dirham trades becoming more popular
  • Banks and traders seek to avoid the dollar, wary of sanctions

Indian companies are utilizing Asian currencies more regularly to pay for Russian coal imports, according to industry sources and customs documents, keeping away from the U.S. dollar and reducing the risk of breaching Western sanctions against Moscow.

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Reporters earlier on announced a large Indian coal deal containing the Chinese yuan, but the customs data emphasize how non-dollar settlements are becoming ordinary.

India has hawkishly escalated purchases of Russian coal and oil since its invasion of Ukraine began, helping to protect Moscow from the impacts of the sanctions and enabling New Delhi to acquire raw materials at discounts in comparison to other countries.

Russia became India’s third-biggest coal supplier last month, with imports growing by more than a fifth from June to a record 2.06 million tonnes.

In June, Indian buyers paid for at least 742,000 tonnes of Russian coal using currencies except for the U.S. dollar, according to a summary of deals collated by a trade source based in India using customs documents and dealt out to Reuters, equivalent to 44% of the 1.7 million of tonnes of Russian imports that month.

Indian cement manufacturers and steelmakers have bought Russian coal using the yuan, United Arab Emirates dirham, the euro, and Hong Kong dollar in recent weeks, according to custom documents independently reviewed by Reuters.

The Hong Kong dollar made up 28% and the yuan comprised 31% of the non-US dollar payments for Russian coal in June. The Emirati dirham accounted for about one-sixth and the euro under a quarter, based on data from the trade source.

India’s Ministry of Finance, which managed the customs board, did not respond to emails for comment verifying the documents. The Ministry of Commerce and Industry refused to comment. The Reserve Bank of India also failed to respond to requests for comment.

The RBI has completed payments for commodities in the Indian rupee, a move it hopes to enhance bilateral trade with Russia in its currency.

The U.S dollar has been the leading currency for Indian commodity imports, traders said, and the greenback accounts for the bulk of the country’s foreign exchange reserves.

For deals in a currency other than the dollar, lenders would likely have to send dollars to bank branches in the country of the original currency, or banks they have links with, in return for that currency to pay for the trade.

Keeping The Dollar At A Distance

A trader based in Europe who deals with Russian coal and two traders based in India that purchase coal for domestic customers said they anticipated the share of non-dollar transactions for Russian coal to grow as banks and other parties pursue ways of protecting themselves against any further tightening sanctions.

Buying Russian coal using the U.S. dollar is banned by Indian firms.

Reporters managed to validate customs documents for four of the eleven vessels in the summary of Russian coal traders in June issued by the trade source, which indicated payments using the euro, Emirati dirham, and the yuan, using shiptracking data and by talking to an independent customs agent based in India.

Another three vessels in the 11 deals in the trader’s summary were settled using the yuan and the Hong Kong dollar, two trade sources with knowledge of the transactions verified.

In one of the three deals, Jindal Steel and Power Ltd (JSPL) (JNSP.NS) shipped 79,721 tonnes of so-called PCI coal in the vessel Zheng Kai, from Russia’s Ust-Luga port using yuan, as per the two sources.

Competitor steelmaker Arcelormittal Nippon Steel India imported 35,000 tonnes of Russian anthracite coal using euros, according to a customs document dated June 15. Arcelormittal Nippon and JSPL refused to comment.

US and Chinese currency US dollar and Chinese yuan

Non-dollar imports lasted into July. Two Indian customs documents from July evaluated by Reuters showed that Indian firms decided to pay for Russian coal using Emirati dirhams and Hong Kong dollars.

India’s JK Lakshmi Cement (JKLC.NS) shipped in 10,000 tonnes of Russian thermal coal in the bulk vessel Ada, a customs document dated July 20 showed. The invoice was priced at 14.62 million Emirati dirhams ($3.98 million), and trader Swiss Singapore smoothened the deal.

JK Lakshmi failed to respond to emails or calls seeking comment. Swiss Singapore, owned by Indian conglomerate Aditya Birla Group, failed to respond to requests for comment.

Indian coal trader Chettinad Logistics shipped in 25,000 tonnes of Russian thermal coal from Singapore-based trader Avani Resources and made payments in Hong Kong dollars, according to another customs document dated July 20.

($1 = 0.9764 euros) ($1 = 7.8497 Hong Kong dollars)

($1 = 3.6729 UAE dirham)



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