The central bank of India is working on a rupee-ruble mechanism to protect trade with Russia from Western sanctions. All the details
India is considering an agreement on transactions in rupees-rubles with Russia to guarantee the continuation of trade with Moscow: the sanctions imposed by the United States and Europe against Russia for the invasion of Ukraine, in fact, are complicating trade with the country. WHAT THE FINANCIAL TIMES WRITES The negotiations between India and Russia on the payment mechanism in question, as reported by the Financial Times, are still at an early stage. What drives New Delhi is the desire to continue buying energy products and other goods from Moscow: in 2021 Russia's exports to India amounted to 6.9 billion dollars and consisted mainly of mineral oils and fertilizers. According to the Financial Times, the Reserve Bank of India is discussing the rupee-ruble payment scheme with the government and state banks (such as the State Bank of India, the country's largest). The final decision will rest with the political authorities. THE CONTEXT While the West - and in Asia Japan above all - has imposed very harsh sanctions on the Russian central bank and excluded several Russian institutions from the SWIFT payments network (the international standard), India has chosen to remain neutral. It has also refrained, at the UN, from condemning Russia for the aggression against Ukraine. It did so because India considers Russia a useful country for balancing China, perceived as a direct threat, immediately beyond its borders. Moreover, for New Delhi, Moscow is the main supplier of military equipment, although it is reducing that dependence and increasing purchases from the United States. THE DECLARATIONS The Russian ambassador to New Delhi, Denis Alipov, recently declared that Russia and India have means of "cooperation and transaction independent of Western financial mechanisms". Sakthivel, president of FIEO (an Indian government organization that deals with export promotion), told the Financial Times that "other nations are banning exports to Russia, so it's a good time for Indian exporters to enter the market. Russian". WILL THE UNITED STATES REACT? It is not excluded that the Indo-Russian agreement on the rupee-rubles mechanism could anger the United States, which does not want to see the hegemony of the dollar undermined and which represents the main destination for Indian exports, purchasing goods for more than 50 billion dollars. In 2021, Indian exports to Russia were worth 3.3 billion. In the plans of India and Russia, however, there is an intention to boost bilateral trade up to $ 30 billion by 2025, compared to $ 8 billion in 2021. Currently, the trade balance is leaning in Moscow's favor. THE INDIAN BACKGROUND In the past, the Indian central bank had a rupee-ruble exchange program with the Soviet Union, limited, however, to certain products: it remained active from the 1970s until 1992. And two Indian banks have also developed a mechanism rupees-rial to allow Indian companies to buy Iranian oil, bypassing US-imposed sanctions. THE AGREEMENT ON DISCOUNTED OIL In recent days, an Indian government official told Reuters that “Russia is offering oil and other commodities at a steep discount. We will be happy to accept it ". Moscow is not a major supplier of oil to New Delhi: it is worth just 2-3 percent of the total imported. India, however, buys as much as 80 percent of the oil it consumes from abroad, and in a context of high prices it needs to find low-cost barrels to contain expenses.
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