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According to an invoice seen by Reuters and a source, a cement producer in India recently bought Russian coal in RMB, and the largest private bank in India, the Housing Development Finance Bank of India, also participated. More details about such transactions are emerging, which may weaken western sanctions against Moscow.
The details of this transaction have never been reported before, and there is no indication that it violates western sanctions against Russia in any way.
But this document shows a way for Russia to continue to sell commodities overseas instead of settling in dollars. Russia is subject to restrictions aimed at freezing it out of the financial market.
According to the invoice and informed sources on June 5th, the Housing Development Finance Bank of India supported cement producer Ultratech to buy Russian coal from producer and trader SUEK at a price of 654.38 million yuan+72.7 million yuan (US$ 25.74 million).
According to the invoice, the letter of credit for this transaction was issued by the Indian Housing Development and Finance Bank, Andheri East Branch, Mumbai. The US dollar is the preferred currency for global raw material trade, but some traders say that RMB may be increasingly used to pay for raw materials from Russia. In the invoice, SUEK asked Ultratech to remit RMB 654.38+72.7 million to SUEK's account in China Everbright Bank Shanghai Branch. SUEK listed the international bank Hongkong and Shanghai Banking Corporation as the correspondent bank. The correspondent bank acts as an intermediary in the process of transferring funds from one bank to another. Reuters could not determine whether China Everbright Bank received a sum of money or whether HSBC or any other bank participated in the transfer of funds. The Housing Development Finance Bank of India and HSBC declined to comment. Ultratech, SUEK and China Everbright Bank also didn't respond to requests for comment. It is not clear from the invoice in which currency the payment was made, but the quotation is denominated in RMB. Reuters reported last week that Ultratech imported 654.38+057 million tons of coal from SUEK registered in Switzerland, and agreed to settle the balance in RMB.
Renminbi trading is still rare.
For India, this payment method may become more common, as India seeks to maintain trade relations with Russia in commodities such as oil and coal without violating Western sanctions.
India and Russia have deep political and security relations. India did not condemn the war in Ukraine, but Russia called it "special military action".
Recently, India's energy imports from Russia have increased sharply, because businessmen can't sell energy to many western markets, so they offer great discounts.
New Delhi defended the purchase of Russian goods, saying that these goods are legal, and suddenly stopping buying will further increase prices and harm the interests of consumers.
More use of RMB for settlement may help to free Moscow from punishment, and help Beijing to further promote the internationalization of RMB and weaken the dominant position of the US dollar in global trade.
However, it is still rare for Indian companies to agree to trade settlement with non-China companies in RMB. In the absence of sanctions, overseas payments to Russian commodity and energy companies are usually paid to Russian accounts in US dollars through SWIFT.
For Indian trade settled in RMB, lending institutions can remit US dollars to foreign banks with sufficient RMB reserves or China banks that have cooperative relations with them in exchange for RMB settlement trade.
The invoice also mentions the SWIFT account numbers of HSBC Hong Kong Branch and Everbright Shanghai Branch. Reuters could not confirm whether any payment was made through the SWIFT platform.
SWIFT is a secure information system, which can promote fast cross-border payment and make international trade flow smoothly. In recent months, several Russian banks have been excluded from the system.
A spokesperson said: "As a policy, SWIFT does not comment on inter-agency traffic.
In 2020, a deadly military border conflict broke out in the bilateral trade between India and China (enterprises mainly paid in US dollars), which aggravated the unresolved tension, but it has flourished since then.
New Delhi has stepped up its scrutiny of China's investment and imports, and banned some mobile applications for security reasons.
Sources told Reuters last week that the Indian government and central bank have realized that Russian goods may be paid in RMB. The Indian government and central bank did not comment on this article.