Indian companies are tiptoeing around Western sanctions against Russia by buying its coal using currencies other than the US dollar.
In June, some 30% of the payments by Indian entities for the commodity were in the Chinese yuan and 28% in Hong Kong dollar, Reuters reported. The euro accounted for under a quarter and the UAE dirham around a sixth.
In recent months, major Indian banks have allowed trade financing options in over 10 world currencies, including the Singapore dollar. This, particularly includes letter of credit—a document that guarantees the buyer’s payment to the sellers—for easy payments to Russian entities.
There’s been a scramble among Indian traders for such alternatives. Especially so after Russia, desperate for some wiggle room against the US sanctions, offered discounts of up to 30% to Indian companies.
“Russia is giving a very huge discount, plus they have the cheapest mode of transport as far as India is concerned,” a coal market expert told Quartz, on the condition of anonymity.
In July, Russia became India’s third-largest coal supplier with record imports of 2.06 million tonnes.
Discounts on Russian coal has fared well
India, understandably, has refrained from openly condemning Russia’s attack on Ukraine. The restraint has served it well amid attempts to diversify its raw material supplies from Western countries.
Prime minister Narendra Modi’s government has also argued that abruptly ending Russian imports would spike prices and hurt consumers.
The sanctions have, thus, rendered Russian coal cheaper for Asian buyers like China and India as compared to Australian, Indonesian, or South African coal, traders believe.