Why is Russia trying to sell oil to India?

• This news comes in the backdrop of economic sanctions imposed by the West against Russia after the Russian military invaded Ukraine late last month.
  
  
• Russia has been trying to sell oil at a significant discount to India as demand for Russian oil has dropped since the U.S. and Europe imposed sanctions last month.
  
  
• As part of Western sanctions, certain Russian banks were removed from the SWIFT payments system, thus affecting Russia’s ability to trade with the rest of the world.
  
  

Why use the Chinese yuan instead of the U.S. dollar for oil trade?

• Major oil producers have for decades sold their produce to foreign buyers in exchange for U.S. dollars. Oil sellers have been willing to accept U.S. dollars for their oil because the currency is widely accepted in the global market for goods and services.
  
  
• Since global trade that is carried out using dollars is cleared by banks located in the United States, the U.S. government has the power to freeze dollars that belong to its adversaries which then debilitates economies.
  
  
• To avoid this risk, many countries have been looking at alternatives to the U.S. dollar to carry out international trade.
  
  
• Of late, China has emerged as a significant economic power and this in turn has boosted the value of the yuan in the eyes of people and made it an increasingly acceptable currency for global trade.
  
  
• However, it should be noted that only about 3% of global trade is facilitated by the Chinese yuan while almost 90% of global trade still happens through the use of U.S. dollars.