New Delhi: Recent purchases of cement maker Russian coal using the yuan India’s largest private lender, HDFC Bank, is included, according to an invoice seen by Reuters and a source, as more details emerge of the kind of business that could blunt Western sanctions against Moscow.
There is no suggestion that the purchase, the details of which have not been previously disclosed, in any way violates sanctions imposed on Russia in the wake of its invasion of Ukraine.
But the document shows a way in which Russia could continue selling goods abroad without settling in US dollars despite sanctions aimed at freeing it from financial markets.
According to the June 5 invoice and a source familiar with the matter, the HDFC Bank-backed cement maker ultratechPurchase of Russian coal from producer and trader SUEK for 172.7 million yuan ($25.74 million).
The letter of credit for the deal was issued by HDFC Bank’s Andheri East’s Mumbai suburban branch, according to the challan.
The dollar is the currency of choice for global trade in raw materials, but some traders say the yuan may increasingly be used to pay for supplies from Russia.
In the invoice, SUEK requests UltraTech to remit 172.7 million yuan to the account of SUEK’s Shanghai branch. China Everbright Bank, SUEK lists the Hong Kong branch of the international lender HSBC as a correspondent bank.
A correspondent bank acts as an intermediary in the transfer of funds from one bank to another. Reuters could not determine whether China Everbright had received the payment or if HSBC or any other bank was involved in the transfer of funds.
HDFC Bank and HSBC declined to comment. UltraTech, SUEK and China Everbright Bank did not respond to requests for comment.
It was not clear from the invoice which currencies were used to influence the yuan payment. Listed amount. was cited in Chinese Yuan And Reuters reported last week that UltraTech imported 157,000 tonnes of coal from Switzerland-registered SUEK and has agreed to settle the final payment in that currency. read more
Yuan trading still rare
For India, such payment methods may become more common as it seeks to maintain trade ties with Russia for commodities, including oil and coal, without the risk of violating Western sanctions.
India has deep political and security ties with Russia and has refrained from condemning the Ukraine war, which Russia calls a “special military operation”.
India’s energy imports from Russia have increased recently as many traders unable to sell in western markets have offered huge discounts.
New Delhi has defended its purchase of Russian goods, saying they are legal and that the sudden stop will push prices further and hurt consumers.
More use of the yuan to settle payments could help Moscow avoid penalties and help Beijing further internationalize the yuan and remove the dominance of the US dollar in global trade.
However, it is still rare for an Indian firm to agree to do business with a non-Chinese company in yuan. In the absence of sanctions, foreign payments to Russian commodity and energy companies will usually be made in dollars in Russian accounts via SWIFT.
For Indian trade settlements using the yuan, lenders will likely send dollars to foreign banks with substantial yuan reserves, or tie up with Chinese banks in exchange for the yuan to settle trade.
The invoice mentions the SWIFT transaction IDs of both HSBC’s Hong Kong branch and China Everbright’s Shanghai branch. Reuters could not confirm whether any payments were made using the SWIFT platform.
SWIFT is a secure messaging system that facilitates fast cross-border payments, allowing international trade flows to flow smoothly. Several Russian banks have been disconnected from the system in recent months.
“As a matter of policy, SWIFT does not comment on flows between institutions,” a spokesperson said.
India’s bilateral trade with China, for which companies pay largely in dollars, has flourished in 2020 even after a deadly military border conflict between the two has not eased tensions.
New Delhi has increased scrutiny over Chinese investments and imports, and banned some mobile apps over security concerns.
Sources told Reuters last week that the Indian government and central bank were aware of a possible payment for Russian cargo in Chinese yuan. The government and central bank did not comment for this article.
There is no suggestion that the purchase, the details of which have not been previously disclosed, in any way violates sanctions imposed on Russia in the wake of its invasion of Ukraine.
But the document shows a way in which Russia could continue selling goods abroad without settling in US dollars despite sanctions aimed at freeing it from financial markets.
According to the June 5 invoice and a source familiar with the matter, the HDFC Bank-backed cement maker ultratechPurchase of Russian coal from producer and trader SUEK for 172.7 million yuan ($25.74 million).
The letter of credit for the deal was issued by HDFC Bank’s Andheri East’s Mumbai suburban branch, according to the challan.
The dollar is the currency of choice for global trade in raw materials, but some traders say the yuan may increasingly be used to pay for supplies from Russia.
In the invoice, SUEK requests UltraTech to remit 172.7 million yuan to the account of SUEK’s Shanghai branch. China Everbright Bank, SUEK lists the Hong Kong branch of the international lender HSBC as a correspondent bank.
A correspondent bank acts as an intermediary in the transfer of funds from one bank to another. Reuters could not determine whether China Everbright had received the payment or if HSBC or any other bank was involved in the transfer of funds.
HDFC Bank and HSBC declined to comment. UltraTech, SUEK and China Everbright Bank did not respond to requests for comment.
It was not clear from the invoice which currencies were used to influence the yuan payment. Listed amount. was cited in Chinese Yuan And Reuters reported last week that UltraTech imported 157,000 tonnes of coal from Switzerland-registered SUEK and has agreed to settle the final payment in that currency. read more
Yuan trading still rare
For India, such payment methods may become more common as it seeks to maintain trade ties with Russia for commodities, including oil and coal, without the risk of violating Western sanctions.
India has deep political and security ties with Russia and has refrained from condemning the Ukraine war, which Russia calls a “special military operation”.
India’s energy imports from Russia have increased recently as many traders unable to sell in western markets have offered huge discounts.
New Delhi has defended its purchase of Russian goods, saying they are legal and that the sudden stop will push prices further and hurt consumers.
More use of the yuan to settle payments could help Moscow avoid penalties and help Beijing further internationalize the yuan and remove the dominance of the US dollar in global trade.
However, it is still rare for an Indian firm to agree to do business with a non-Chinese company in yuan. In the absence of sanctions, foreign payments to Russian commodity and energy companies will usually be made in dollars in Russian accounts via SWIFT.
For Indian trade settlements using the yuan, lenders will likely send dollars to foreign banks with substantial yuan reserves, or tie up with Chinese banks in exchange for the yuan to settle trade.
The invoice mentions the SWIFT transaction IDs of both HSBC’s Hong Kong branch and China Everbright’s Shanghai branch. Reuters could not confirm whether any payments were made using the SWIFT platform.
SWIFT is a secure messaging system that facilitates fast cross-border payments, allowing international trade flows to flow smoothly. Several Russian banks have been disconnected from the system in recent months.
“As a matter of policy, SWIFT does not comment on flows between institutions,” a spokesperson said.
India’s bilateral trade with China, for which companies pay largely in dollars, has flourished in 2020 even after a deadly military border conflict between the two has not eased tensions.
New Delhi has increased scrutiny over Chinese investments and imports, and banned some mobile apps over security concerns.
Sources told Reuters last week that the Indian government and central bank were aware of a possible payment for Russian cargo in Chinese yuan. The government and central bank did not comment for this article.