Indian cement maker uses yuan to buy Russian coal

The purchases that have previously taken place and which were not reported do not breach the sanctions imposed on Russia in the wake of the war. This means Russia can continue to sell commodities abroad despite the restrictions that are aimed at freezing Russia out of the financial markets. 

In the wake of the war, the supply chains in Russia have been severely effected and inflation has been spiking above 15 percent. Russia is at a risk of losing its status as a major economy and will continue a long descent into economic, financial and technological isolation. The inflation may wipe out the gains from the last fifteen years. 

Ultratech cement, which is backed by HDFC Bank, has made a purchase of Russian coal from producer and trader SUEK for 172.7 million yuan. SUEK has been exporting coal to India for over a decade now and SUEK has previously signed a pact with TATA in 2015 to identify and target opportunities in Russia. 

The dollar has been the choice for global trade transactions but some traders say that the yuan could increasingly be used to settle payments for supplies from Russia. In an invoice, SUEK has requested Ultratech to remit 172.7 million yuan to SUEK's account at the Shanghai branch of China Everbright Bank. SUEK lists HSBC an international lender as the correspondent bank. A correspondent bank acts as the middleman in the transfer of money from one bank to the other. Ultratech imported 157,000 tonnes of coal from Switzerland-registered SUEK and agreed to settle the final payment in that currency. 

In the coming days, such payments may become common for India as it seeks to maintain trade ties with Russia for commodities like oil and coal without the risk of contravening Western sanctions. India has deep political and security ties with Russia. India's energy imports from Russia have soared recently as traders in Russia are unable to sell into many Western markets and they have offered steep discounts. 

SWIFT is a platform used to make cross-border payments. It is a secure messaging system that allows for smooth international trade flow. In the absence of sanctions on Russia, overseas payments are made using SWIFT and in dollars. Several Russian banks were cut off from the system in the recent months. It was not confirmed if the transaction this time was made via SWIFT.

Sources: https://www.fpri.org/article/2022/06/the-wars-impact-on-russias-economy-and-ukrainian-politics/