RT 28 Mar, 2022 08:03am
A mechanism allowing the switch to domestic currencies is expected to be operational this week
A system allowing direct rupee-ruble payments in trade between Russia and India could be launched this week, the president of the Federation of Indian Export Organizations (FIEO), A Sakthivel, told CNBC on Wednesday.
The arrangement would allow India and Russia to carry out financial operations bypassing the US dollar.
Russia is effectively blocked from using US currency due to Western sanctions over the conflict in Ukraine.
According to the official, the Indian government is working on a proposal to allow up to five nationalized Indian banks to be engaged in the rupee-ruble trade mechanism, and discussions between the central bank governor, the finance minister, and the banks on the matter have already been held. The arrangement would let Indian exporters continue doing business with Russia despite sanctions banning, among other things, international payment mechanisms in the country, such as SWIFT. It would also let India continue buying Russian energy exports and other goods.
According to Sakthivel, the Indian economy could profit from sanctions Russia is facing, as they give Indian exporters an opportunity to expand on the Russian market.
“Export to Russia is not much, only in agriculture and pharmacy products. Now that the whole of the West is banning Russia, there will be a lot of opportunities for Indian firms to enter Russia,” he stated.
India’s finance ministry and the Reserve Bank of India have not yet commented on the new trade arrangement.
Unlike the US and the EU, India has not criticized Russia over its military operation in Ukraine, and has abstained from condemning Moscow during the recent UN voting rounds. When asked whether India’s continued commerce with Russia would draw Western ire, Sakthivel said his country had taken a “neutral stand” on the situation in Ukraine.
“The government will take into account all the factors. The government is playing it very carefully,” he stressed.
India exported $3.3 billion worth of goods to Russia in 2021, mostly pharmaceutical products, tea, and coffee. In terms of imports, India bought $6.9 billion worth of Russian products, including arms and defense goods, mineral resources, fertilizers, metals, diamonds and other precious stones.
India also imports Russian oil, with recent media reports stating that the country’s major refiner, Indian Oil Corp, has stepped up purchases of Russian crude over the past month. India is also reportedly considering buying raw materials from Russia and Belarus for fertilizer production amid skyrocketing commodities’ prices.
Russia Foreign Minister Sergey Lavrov Likely To Visit India Next Week – What’s On Agenda
Russian Foreign Minister Sergey Lavrov is likely to visit India in the next one week.
Edited by Snigdha
New Delhi: Russian Foreign Minister Sergey Lavrov is likely to visit India in the next one week. This would the first highest-level visit from Russia to India after Moscow declared war in Ukraine on Feruary 24. The key focus of the visit is expected to be on the discussions on a payment system for New Delhi’s procurement of oil and military hardware from Moscow, people familiar with the developments was quoted as saying by news agency PTI. The Ministry of External Affairs or the Russian Foreign Ministry is yet to make an official announcement about the visit.
There has been a flurry of high-level visits to India in the last few weeks including by Chinese Foreign Minister Wang Yi, US Under Secretary of State for Political Affairs Victoria Nuland and foreign ministers of Austria and Greece. Meanwhile, British Foreign Secretary Liz Truss is scheduled to visit India on Thursday. On Lavrov’s proposed visit, the people cited above said the main focus is likely to be a payment system for India’s procurement of Russian crude oil and military hardware.
The Western sanctions on Russia have created difficulties in making payments to that country. It is learnt that both sides have been looking at activating a rupee-ruble payment system. Unlike many other leading powers, India has not yet criticised Russia for its invasion of Ukraine and it abstained from the votes at the UN platforms in condemning the Russian aggression. However, last Thursday, India abstained on a resolution pushed by Russia on the humanitarian crisis in Ukraine, which was seen as reflective of its neutral position on the conflict.
India has been pressing for the resolution of the crisis through diplomacy and dialogue. Prime Minister Narendra Modi has held phone conversations with Russian President Vladimir Putin on February 24, March 2 and March 7. PM Modi had spoken to Ukrainian President Volodymyr Zelenskyy twice.
Last week, External Affairs Minister S Jaishankar said in Parliament that India’s position on the Ukraine conflict has been “steadfast and consistent” and that it has been seeking immediate cessation of violence. His comments came in the backdrop of increasing disquiet in the West over India not criticising Russia for its invasion of Ukraine and abstaining from the votes at the UN Security Council.
Russia has been India’s major supplier of military hardware and New Delhi has been worried about possible delays in the supply of some key platforms and equipment because of the Ukraine conflict. India has also decided to purchase discounted crude oil from Russia, triggering concern among a number of Western powers.
White House Press Secretary Jen Psaki said around two weeks back that India taking the Russian offer of discounted crude oil would not be a violation of the US sanctions on Moscow but underlined that countries should also think about “where you want to stand” on the Russian action.