Russia prefers Yuan and doesn't want useless Rupee.
Russia has an excess supply of rupees, which it’s struggling to use, while at the same time its demand for yuan has grown sharply in the past year as the economy becomes more reliant on China for imports. Russian businesses have been settling more of their trade in yuan, with the Chinese currency this year replacing the dollar as the most traded currency in Russia.
Indian refiners mostly pay for Russian oil imports in dirhams — the currency of the United Arab Emirates — US dollars, and a small amount of rupees, if oil prices are above the $60 a barrel cap imposed by the US and its allies on Russian oil. While the yuan is sometimes used in smaller transactions, Russian oil suppliers are requesting that the Chinese currency be the main unit of transaction for oil trade, according to the senior Indian government official.
Russia has accumulated billions of dollars worth of rupee assets given its wide trade surplus with India, but it’s struggling to use the funds. The rupee isn’t a fully convertible currency internationally, making it difficult to use in global trade.
Russian Foreign Minister Sergei Lavrov said in May the build-up of rupees is a “problem” and discussions were taking place on how the funds can be transferred into another currency.
Indian refiners want to use dirhams over yuan in order to comply with the government’s instructions, according to one of the people familiar with the matter. However, some suppliers of Russian oil are not in favor of using the UAE’s currency since it requires them to conduct the transactions out of Dubai, which would result in more scrutiny of the funds, the person said.