Indian refiners have used Chinese yuan to settle payments for Iranian oil purchases made under a temporary US sanctions waiver, marking a shift in payment mechanisms amid geopolitical and financial constraints. The transactions were routed through ICICI Bank’s Shanghai branch, according to sources familiar with the development.
The purchases follow a 30-day waiver granted by the United States to allow limited trade in Iranian oil, aimed at easing global supply pressures. The waiver, which is set to expire soon, enabled Indian refiners to resume imports from Iran for the first time in nearly seven years. State-run Indian Oil Corporation (IOC) is reported to have bought around 2 million barrels of Iranian crude as part of this window.
Payment Shift Reflects Sanctions Constraints
The use of yuan reflects the challenges of conducting oil trade under US sanctions, which restrict dollar-based transactions with Iran. Routing payments through non-dollar channels allows buyers and sellers to complete deals while avoiding direct exposure to the US financial system. Similar mechanisms have been used in transactions involving Russian oil in recent years.
However, the arrangement remains limited in scope, with some refiners cautious due to compliance risks and payment complexities. The waiver is also not expected to be extended, which could restrict further imports from Iran.
The development highlights evolving global energy trade dynamics, where alternative currencies and financial channels are increasingly being used to navigate sanctions and maintain supply continuity.
(Reuters iinputs)