India buys Russian oil in yuan: Did China just hijack the world’s energy market?

India has resumed paying for Russian oil in Chinese yuan after a months-long pause, highlighting the deepening global shift away from the U.S. dollar in energy trade as Western sanctions on Moscow tighten.

Indian Oil Corp, the country’s top state-run refiner, has completed several yuan-denominated transactions for shipments of Russian crude, Reuters reported on October 7. The move follows growing pressure from Russian traders seeking payments in currencies easily converted into rubles.

While Russian oil prices remain quoted in U.S. dollars to comply with the EU’s price-cap system, Indian refiners now settle the equivalent amount in yuan—a practical workaround to navigate tightening financial restrictions and conversion delays in dollar or dirham channels.

According to geopolitical strategist Velina Tchakarova, the decision reflects pragmatism rather than politics. Writing on X, she noted that “the oil is still priced in U.S. dollars to stay within the EU’s price-cap framework, but the settlement—the actual transfer of funds—is now in yuan.” Tchakarova added that India’s use of the Chinese currency shows how major importers are adapting to sanctions-era trade realities without openly defying Western rules.

India has emerged as Russia’s biggest oil customer since European embargoes began in 2022. Russian crude now covers about 40% of India’s total oil imports—up from less than 1% before the Ukraine war—saving New Delhi an estimated $17 billion, Reuters reported.

Despite new U.S. tariffs on Indian goods, New Delhi continues prioritizing Russian oil on economic grounds. Bloomberg reported that India imported roughly 1.6 million barrels per day from Russia in September, maintaining steady flows even as discounts narrowed.

For Moscow, the yuan payments tighten financial ties with Beijing under the “DragonBear” framework. For China, they boost the yuan’s credibility in global commodity trade. For India, they keep energy costs low while balancing complex relationships with Washington, Moscow, and Beijing.

If sustained, this yuan-for-oil mechanism could mark a structural turning point—quietly eroding the dollar’s long-held dominance in global energy markets.