Espreso. Global

Russia faces currency problems trading oil in Asia - Reuters

28 November, 2023 Tuesday
17:15

Asian countries pay for Russian oil not in US dollars, but in another currency, making Russia experience problems. And there is no solution to these challenges in sight

This is stated in the material of Reuters.

It is noted that the US dollar has been the currency of international oil trade for decades, and attempts to find an alternative have never been successful.

Problems for Moscow arose when India, which became the largest buyer of tanker oil in Russia after European customers refused to pay for it, insisted on paying in rupees in July, which, according to Russian oil traders, almost collapsed the trade.

Oil suppliers from Russia, who are not being named due to the sensitivity of the issue, cannot make deals in Indian rupees due to unofficial warnings from the Russian central bank that it will not accept this currency.

As sources close to the Russian Central Bank told Reuters, it is "pointless" to earn income in a non-convertible currency with little value outside of India.

India encourages rupee spending on its territory and has introduced penalty exchange rates for converting rupee into other currencies, which sometimes amount to more than 10% of the converted amount.

The situation could be alleviated if Russia imported more goods from India that could be paid for in rupees, but India is currently importing much more from Russia. The imbalance is not least due to the fact that Moscow imports the cars, equipment, and other goods it needs from China, leaving Indian products unnecessary.

According to data published by the Indian Ministry of Commerce, India's imports from Russia reached $30.4 billion in April-September, and the trade deficit with Moscow increased to $28.4 billion, compared to about $17 billion in the same period last year.

The seriousness of the payment problems is confirmed by the fact that around mid-August, at least two major Russian oil companies threatened to divert about a dozen tankers with a capacity of up to a million tons of oil bound for India.

As a temporary solution to the conflict over the Indian deals, it was agreed to pay for the cargo in a combination of the Chinese yuan, Hong Kong dollar, and the UAE dirham, which is pegged to the US dollar. However, this will not solve the problem as such.

Russian sellers of crude oil have faced similar difficulties in Africa, China, and Turkey, which have become its largest buyers.

However, the situation in these countries is not as difficult as in India, which, according to Reuters, buys more than 60% of Russian oil transported by sea and has become the second largest oil importer from Russia after China.

In the future, the Russians will face more problems as trade controls are tightened. In recent weeks, Washington has imposed the first sanctions on owners of tankers carrying Russian oil in excess of the price ceiling, and this is only the beginning of the restrictions since they were introduced late last year.

  • On November 16, the United States imposed sanctions on three organizations associated with the Russian Federation for exporting Russian oil at inflated prices.
  • On November 23, it became known that three Greek companies had stopped transporting oil from Russia under pressure from US sanctions.


 
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