NEW DELHI: Indian companies are using Asian currencies more often to pay for Russian coal imports, according to customs documents and industry sources, avoiding the US dollar and cutting the risk of breaching Western sanctions against Moscow.

Reuters previously reported on a large Indian coal deal involving the Chinese yuan, but the customs data underline how non-dollar settlements are becoming commonplace.

India has aggressively stepped up purchases of Russian oil and coal since the war in Ukraine began, helping to cushion Moscow from the effects of sanctions and allowing New Delhi to secure raw materials at discounts compared to supplies from other countries.

Russia became India’s third-largest coal supplier in July, with imports rising by over a fifth compared with June to a record 2.06 million tonnes.

In June, Indian buyers paid for at least 742,000 tonnes of Russian coal using currencies other than the US dollar, according to a summary of deals compiled by a trade source based in India using customs documents and shared with Reuters, equal to 44pc of the 1.7 million of tonnes of Russian imports that month.

Indian steelmakers and cement manufacturers have bought Russian coal using the United Arab Emirates dirham, Hong Kong dollar, yuan and euro in recent weeks, according to customs documents separately reviewed by Reuters.

The yuan accounted for 31pc of the non-US dollar payments for Russian coal in June and the Hong Kong dollar for 28pc. The euro made up under a quarter and the Emirati dirham around one-sixth, the data from the trade source showed.

India’s Ministry of Finance, which administers the customs board, did not respond to emails seeking comments confirming the documents. The Ministry of Commerce and Industry declined to comment.

The Reserve Bank of India also did not respond to requests for comment.

The RBI has approved payments for commodities in the Indian rupee, a move it expects to boost bilateral trade with Russia in its currency.

The US dollar has been the dominant currency for Indian commodity imports, traders said, and the greenback makes up most of the country’s foreign exchange reserves.

For deals in a currency other than the dollar, lenders would potentially have to send dollars to bank branches in the country of the original currency, or banks they have tie-ups with, in exchange for that currency to settle the trade.

Keeping dollars at distance

Two traders based in India that purchase coal for domestic customers and a trader based in Europe who deals with Russian coal said they expected the share of non-dollar transactions for Russian coal to increase as banks and other parties explore ways of cushioning themselves against any further tightening of sanctions.

Buying Russian coal using the US dollar is not illegal for Indian firms.

Reuters was able to corroborate customs documents for four of the 11 vessels in the summary of Russian coal trades in June provided by the trade source, which showed payments made using the yuan, euro and the Emirati dirham, using ship-tracking data and by speaking to a private customs agent based in India.

Published in Dawn, August 11th, 2022