Indian companies are exploring trade settlement in yuan as
they eye coking coal and pulverised coal imports from Russian traders and suppliers.
Some are already using the euro and Emirates dirham for settling transactions.
Traders are offering Russian
coal to Indian steel mills at a 25– 30 per cent discount.
At least two private banks
have reportedly been issuing letters of credit for the trade in Russian coal,
either in Chinese yuan or euro. Apart from steel mills, an Indian cement-maker
has already opted for yuan trade to bring in Russian coal.
Alternative currencies
The dollar is the currency of
choice for global trade in raw materials, but some traders say alternative
currencies are being increasingly explored to settle payments for supplies from
Russia.
“We had reached out to some
PSBs for a Letter of Credit (LC) since we were looking to bring in coal from
the European nation. Settlements were to be made in euros. However, PSBs have
refused to go ahead with LC for Russian trade. Hence, we approached a private
bank which has been ready to go ahead with settlement in euros. We are paying
extra for the conversion of dollars to euros, plus insurance costs,” an
official of a steel mill told BusinessLine.
Another mill owner said it
was open to yuan trade and was exploring such options with banks. “One
cement-maker has done it. We have asked our legal and procurement teams to
study the modalities. If we can get the bank(s) on board, we may look at
settlement of payments in yuan,” an official at a steel company said,
requesting anonymity.
Working around sanctions
In order to facilitate the
trade, most of these companies would raise purchase orders from their European,
Middle East or subsidiaries elsewhere where trade with Russia has not come
under sanctions. These subsidiaries would then buy the coal and ship the same
to Indian players. Payment to the subsidiary would be made in alternative
currencies. These trade sources say this is the most simplistic way of working
around sanctions.