India Settles Payments for Iranian Crude Oil in Chinses Yuan

(MENAFN) Indian refiners are settling payments for Iranian crude oil in Chinese yuan, following a short-term US sanctions waiver that briefly reopened the door for New Delhi to resume purchases from Tehran, media reported.

Washington granted the one-month waiver on March 20, a concession it has since confirmed will not be renewed once it lapses.

The financial mechanics underpinning the deal are far from straightforward. Persistent US sanctions on Iran have long complicated payment arrangements, deterring many potential buyers from engaging with Iranian crude markets altogether.

Indian Oil Corp moved to capitalize on the opening, acquiring 2 million barrels of Iranian oil in April — the country's first such purchase in seven years — in a transaction reportedly valued at approximately $200 million. Separately, New Delhi granted berthing clearance to four vessels carrying Iranian oil destined for Reliance Industries, the country's largest private refiner.

Both transactions are being processed through ICICI Bank, a private financial institution routing the yuan-denominated funds through its Shanghai branch, media reported. The arrangement mirrors a precedent already established in India's energy trade — Indian refiners have previously relied on yuan to settle portions of their Russian oil purchases, a practice that gained traction after the Ukraine conflict escalated in 2022.

The preference for yuan in these transactions is pragmatic rather than ideological. Traders supplying Russian oil to Indian buyers favor the Chinese currency because it eliminates the need for conversion prior to paying upstream producers. The yuan has since entrenched itself as a dominant foreign currency within Russia's financial system.

The currency's expanding role in global energy markets aligns with the broader strategic ambitions of Beijing. President Xi Jinping has previously argued that the yuan's emergence as a global currency would be essential for China to develop into a true "financial powerhouse," a vision gaining urgency amid sustained debate over the US dollar's long-term status as the world's reserve currency.

The resumption of Iranian crude imports marks a significant, if tentative, shift in India's energy calculus. Iranian oil accounted for 11.5% of India's total crude imports before New Delhi suspended purchases in 2019 following the tightening of US sanctions.

India is the world's third-largest importer and consumer of oil, sourcing approximately 90% of its total requirements from international markets. Its emergence as a pivotal buyer of discounted Russian crude following the escalation of the Ukraine war in 2022 underscores the scale of its purchasing power — Russian oil imports surged to $5.8 billion in March alone, up sharply from $1.54 billion the previous month.

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