Since the dissolution of the Soviet Union and the initiation of market-oriented reforms in Russia, it can be argued that Russia has not been able to establish a truly market-oriented economic system. The comprehensive economic structure of the former Soviet era fell apart after its disintegration, and both Russia's previous heavy and light industrial production systems were largely weakened by the failed transition. The Russian economy gradually became highly dependent on energy exports to sustain its basic operations. Existing studies[1] show that income from natural gas and crude oil exports alone consistently accounts for about 50% of Russia's fiscal revenue, with the GDP share roughly maintaining around 25% annually. The importance of energy exports is self-evident.

With the eruption of the Russia-Ukraine conflict in February 2022, there has been a progressive escalation of sanctions by the West against Russia. Russia has been formally ejected from the SWIFT settlement system, and both the U.S. and Europe have initiated a gradual reduction in the importation of Russian oil and gas. To sustain fiscal revenues and bolster military endeavors, Russia has started to pivot its exports towards its eastern neighboring nations. India and China have emerged as pivotal in this. Furthermore, amidst Russia's deepening isolation, there have been notable shifts in the dynamics of energy trade and settlement practices among India, China, and Russia.

Regarding Russia's crude oil exports, historically, its primary export destinations have been European Union countries, especially Germany. In terms of crude oil[2], in 2021, the EU imported approximately 3.3 million barrels per day from Russia, which slightly decreased to 2.9 million barrels per day in 2022, and sharply dropped to 600,000 barrels per day in 2023. Meanwhile, exports to India expanded rapidly from 100,000 barrels per day in 2021 to 1.9 million barrels per day in 2023, and exports to China increased from 1.6 million barrels per day in 2021 to 2.3 million barrels per day in 2023. In terms of proportions[3], before the outbreak of the Russia-Ukraine conflict, crude oil exports to the EU (via pipelines and maritime routes) accounted for roughly 44% of Russia's total external crude oil exports, with China at approximately 30% and India at around 2%. After the conflict erupted, the EU's overall share gradually decreased to less than 10% by January of this year, while India's proportion rose to over 25% and China's proportion reached 27.81%[4] in January of this year. Therefore, broadly speaking, India has shown a sharp increase, while China has experienced growth, yet not as significant as India.

As for the EU, only some Eastern European countries (such as the Czech Republic, Slovakia, and Hungary) and a few Western European countries (like France and Spain) are still maintaining limited imports of Russian crude oil[5]. Hence, the main recipients of Russian energy exports are undoubtedly shifting towards China and India. In terms of specific amounts and proportions[6], whether for the EU, China, India, or even for the vast majority of countries still purchasing Russian oil and gas, the proportion of Russian oil (crude oil and petroleum products) imports generally remains above 50%. Moreover, in Russia's oil exports, the proportion of crude oil has also consistently remained above 50%, reflecting the significant importance of oil exports, especially crude oil products, in Russia's energy exports.

In terms of energy trade value[7], from January 2023 to March 17 this year, China's total import value of oil (crude oil and petroleum products) from Russia was approximately EUR 81.044 billion, and the total for oil and gas was about EUR 82 billion. India's total import value of oil from Russia was approximately EUR 47.877 billion[8]. If we calculate from the outbreak of the Russia-Ukraine conflict, China's total import value of oil from Russia is about EUR 131.126 billion, with a total of EUR 150.875 billion for oil and gas. Meanwhile, India's total import value of oil is about EUR 68.991 billion. However, if we start calculating from the outbreak of the conflict, the total oil and gas imports from Russia to the EU (EUR 185.134 billion) still exceed those of China and India, but the oil imports alone have also opened up a gap with China (EUR 131.129 billion VS EUR 103.743 billion). This reflects both the depth of the EU's dependence on Russian energy and indirectly indicates the EU's determination and actions to reduce dependence on Russian energy. It also highlights the prominent position of oil trade between China and Russia.

Energy trade settlement-wise, before the outbreak of the Russia-Ukraine conflict, the trade between China and Russia, and between China and India, mainly relied on settlement in the U.S. dollars. However, after the outbreak of the conflict, with Russia being completely expelled from the SWIFT settlement system, trade between China and Russia began to gradually shift towards settlement in their respective currencies. According to Russian data[9], for the first half of last year, 75% of trade between China and Russia was settled in Chinese yuan, and yuan settlements accounted for 25% of Russia's foreign trade settlements outside of China. Furthermore, a report on the website of the Central Bank of Russia[10] further indicates that in January this year, the proportion of settlements in yuan in Russia's exports increased to 40.8%, and in imports, it increased to 38.5%. With this, it can be confirmed that in the China-Russian energy trade, a considerable proportion of Russia's energy imports from China are settled in Chinese yuan.

In terms of energy trade between India and Russia, initially, both countries agreed to start using their respective currencies for settlement. The Indian rupee could be used to pay for oil imports from Russia. However, due to a significant trade imbalance between the two countries, where India's exports to Russia only account for 1/15 of its imports from Russia[11], and the limited international use of the Indian rupee, Russia accumulated large amounts of rupees but couldn't spend them. Since last year, Russia has been continuously urging India to use the currencies of other countries for trade settlement[12]. At first, Russia hoped to settle trade with India in Chinese yuan, and some Indian refineries have already started using yuan to pay for Russian oil imports since May-June last year[13]. However, the Indian government strongly opposed this approach. India prefers to use the UAE currency, i.e., the dirham, to pay for imports from Russia[14]. Russia did not object to this. Moreover, due to the close ties between the UAE and Russian capital[15], as well as the increasing strength of energy trade and currency settlement between the UAE and India[16], it can be assumed that the dirham occupies a significant proportion of payments for Indian imports of Russian energy. The latest data this year indicates that India's industrial exports to Russia (machinery, automotive components, etc.) [17] are expected to double to reach USD 1 billion in the fiscal year 2023 (denominated in Indian rupees). Indian exporters are expected to see growing demand for payments in rupees from Russia. However, this figure is far below the total value of India's oil imports from Russia (over USD 35 billion). As a result, the main currency used by India for paying for energy imports from Russia should be the dirham.

Although there has been repeated speculation in public opinion about a surge in India's oil imports from Russia, detailed data shows that both India's total imports of oil from Russia and its overall energy imports still exhibit a certain gap compared to China. Additionally, this year, Central Asian countries such as Uzbekistan are seeking to increase their imports of natural gas from Russia to transit to China, hoping to earn transit fees[18]. However, this may lead to a further increase in China's share in the pattern of Russia's energy exports. In recent years, geopolitical competition between the West and China has intensified, with the West increasing its efforts to contain China from various aspects including technology and finance. Russia's increased use of the yuan for settling foreign trade transactions is likely to further prompt the West to view the yuan as a "toxic asset". Since the U.S. initiated secondary sanctions against Russia, several Chinese banks, including local banks, have begun refusing to accept yuan payments from Russia[19]. This could result in potential risks or exposure in Russia's yuan assets, leading to a gradual reluctance to accept yuan payments or engage in negotiations regarding this matter in energy trade.

The greatest risk in ordinary and energy trades between Russia and China may therefore be the yuan. ANBOUND suggests that attention should be directed towards such a risk. Although numerous issues exist between Russia and China, the risk is tangible and may surface through the yuan's role in trade, potentially escalating uncontrollably and prompting political intervention, thereby resulting in further costs.