Russia has demanded that India use RMB to settle oil trade, and the Modi government has promised. Meanwhile, the five billion yuan of Chinese enterprises that have been seized in India for three years are still not understood. This is not only an economic accounting, but also a careful balance between India and the US and Russia. Some say Modi is "compromising", and some think he is "smart". But regardless of the way, this is a strategic shift under real pressure.
Since the outbreak of the Russian-Ukrainian conflict, Russia has been blocked by the West and forced to export crude oil at discounted prices. India has come to see the opportunity and quickly expand its procurement. In 2021, Russian oil accounts for only 2 percent of Indian imports, and by the first half of 2025 it has surged to 40 percent. Thanks to cheap Russian oil, India not only meets domestic demand, but also processes and resells Europe, earning net billions of dollars a year.
However, the payment method became difficult. Initially, Russia accepted the rupee settlement, but the rupee exchange rate was unstable, and the international circulation was poor, leading to the rupee in the hands of Russian companies not coming out. India proposed to buy Indian goods in rupee, and the result was that the Russian side did not buy the account. In contrast, the RMB was stable, exchangeable, and could directly purchase goods in China, obviously more expensive.
So Russia simply demanded: either in yuan or not to sell oil. India's mouth hesitated, but the body was honest. By mid-2025, the Indian Oil Company (IOC) was the first to settle two to three batches of goods in yuan, the money was paid through the Chinese banking system, and Russia could directly exchange the ruble in Shanghai or Hong Kong.
This seems to be a diplomatic concession, but it is actually forced by reality. Because at the same time, US President Trump signed an executive order threatening to impose a 25% tariff on countries importing Russian oil and naming India. Settlement between US dollars and dirhams may be restricted at any time. If India wants to stabilize domestic oil prices, the only way out is to "exchange currency transactions".
India's step, which seems to be a compromise, is actually "pragmatic priority". A country whose energy dependence is as high as 80% cannot let oil prices get out of control. For Modi, as soon as the election ended, oil prices were the political lifeline. The United States persuaded it to stop buying Russian oil, but India has already made a lot of money from Russian oil, and it is impossible to cut off its own financial resources.
More importantly, RMB settlement is not politically oriented, but conforms to the global trend of de-dollarization. U.S. dollar sanctions have been frequent over the past two years, and many countries are looking for alternatives. Today, the RMB accounts for 4.7% of the global payment system, and some energy transactions in Japan, the United Arab Emirates and other countries have also turned to the RMB.
India is well aware that holding the dollar will only end up being held by the nose; and using the yuan can not only avoid U.S. sanctions, but also make a profit in China-Russia cooperation.
It is worth noting that India's nod this time is also related to the gradual warming of Sino-Indian relations. Although the two countries still have differences on border issues, they have never decoupled on the economic level. India relies on China's industrial products and equipment, and China also values India's huge consumer market.
Russia's role is more like a "bridge". Sino-Russian trade has long been fully shifted to RMB settlement. By joining this system, India can not only save exchange rate losses, but also integrate into the new settlement circle. For the three parties, this is a pragmatic cooperation in which each takes its needs.
It can be said that the Modi administration's decision this time was not only to counter the pressure of the United States, but also to fight for strategic space for India. it neither completely turned to the West nor fully pro-Russian, but put "economic security" first.
However, India's "flexible diplomacy" does not mean that foreign companies are treated equally. While India uses RMB to buy Russian oil, 5 billion RMB funds of Chinese companies are still frozen.
In April 2022, the Indian Law Enforcement Agency raided Xiaomi's Indian headquarters and froze 555.1 billion rupees (about 4.7-5 billion yuan) in account funds on the grounds that it was suspected of violating the foreign exchange management law and transferring funds through false royalties. Three years later, the court has rejected appeals several times, and the freeze has not been lifted.
Xiaomi's business in India was hit hard as a result. In the first quarter of 2025, Xiaomi India's revenue fell by 35% year-on-year, profits turned from profit to loss, and its market share fell from a peak of 22% to 12%. Even local Indian brands took the opportunity to overtake.
On the surface, this seems to be a legal issue, but actually exposes the Indian government’s “control thinking” about foreign investment – both hoping for foreign investments and afraid of capital outflows.
In the first half of 2025, the flow of foreign investment in India fell by 0.5%, and many Chinese enterprises suspended their expansion plans.
From a more macro perspective, India's "RMB compromise" is a microcosm of changes in the global financial order. The US dollar has dominated international settlement for many years, but sanctions, interest rate hikes, and hegemony have led more and more countries to find alternative ways out. Russia was forced to abandon the US dollar, Saudi Arabia and United Arab Emirates tried diversified settlement, and India's joining the RMB system at this time means that the wave of de-dollarization is further accelerating.
But for India, this is not a smooth path. On the one hand, it needs to maintain strategic cooperation with the United States and balance China in the Indo-Pacific framework; on the other hand, it can not be separated from China's energy and manufacturing support. Modi's strategy is to walk on both sides, try not to choose side. The more you want to "balance", the more likely you will fall into a situation of pressure on both sides.
RMB settlement may stabilize energy costs in the short term, but if India continues to adopt freezing and restrictions on Chinese companies, it will inevitably affect mutual trust between China and India and weaken India's credibility among emerging economies.
Looking back at the whole event, Modi is neither a mere compromise nor a complete cleverness, but a typical realistic manipulation.Buying Russian oil with RMB is for the stability of the economy; freezing Chinese funds is for the protection of local capital; and shaking between the United States and China and Russia is to keep the way back.
But the world economy is not a one-way chessboard.Today, the expansion of the yuan settlement is redefining the international trade pattern, and every step of India is being amplified.
If India can show more openness in energy cooperation and more fairness in foreign investment regulation, it may truly be the winner of the "New Multipolar Age".
As for the detained 5 billion RMB, when will it be returned? This is not only a commercial issue, but also a touchstone for whether India can fulfill its "pragmatic diplomacy" promise.
In this game between geography and currency in India, the surface is calm, but in fact the undercurrent is surging. Modi's abacus is excellent, but he is also on the edge of the blade. RMB settlement gives India a short respite, but whether it can gain a long-term foothold in the future depends on whether it can truly achieve it-political independence, economic openness and fair rules.