World Economy

Yuan to Be Used for Oil Trade

Yuan to Be Used for Oil TradeYuan to Be Used for Oil Trade

The decision by Gazprom Neft, Russia’s third-largest oil producer, to use renminbi for trade settlement may prompt more Russian firms to follow suit, experts said. The Russian company had on Friday said that it would henceforth settle all of its crude sales to China in renminbi.

Gao Jian, an oil analyst at Sublime China Information, a Chinese commodity consultancy, said China is actively promoting internationalization of renminbi in global trading and the energy sector can be a breakthrough, Asian News Network reported.

“Crude trading between China and Russia is huge, and this will help China expand using renminbi in more energy projects in future,” he said. “The exchange rate of renminbi and ruble is stable at the moment and this creates good headwinds for yuan trading.”

The currency cooperation will also help the two countries gain more opportunities to work together in energy and other related sectors, he said.

China National Petroleum Corporation, the Chinese trading partner of Gazprom, declined to comment on the news. Most of the global oil trading is currently done in the US dollar.

Russian companies’ crude exports were largely settled in dollars until last summer, when the United States and Europe imposed sanctions on the Russian energy sector over the Ukraine crisis. The change in currency was necessitated due to the sanctions, said sources.

According to Gao, other than Russia, it might not be easy to promote the use of renminbi as a settlement currency in other markets due to the stiff political pressure from the United States.

Liu Yijun, a professor at the China Petroleum University, said it is not an opportune time for China to use renminbi to buy oil from Russia, due to the uncertain political climate.