The Indian government in New Delhi is developing the means to facilitate direct trade with Russia using the local currencies of the two countries, foregoing any use of the U.S. dollar.
According to the Times of India, a decision by the Indian government is expected as early as next week as the government is in consultation with the nation’s banks on how trade can be settled using rubles and rupees due to international sanctions imposed by the U.S. government on Russian trade.
The publication reports that Indian exporters are awaiting payments of about $500 million that were delayed due to sanctions on Russian banks.
Under the mechanism proposed by the Indian government, the ruble could be deposited into an Indian bank after being converted into rupee, and vice versa. There remain concerns on how to peg the currencies and ways to balance the trade as India is a net importer of Russian products, including military equipment.
Russia has told the country that it is looking for alternative suppliers for a wide range of goods after its access to western markets was cut off by the sanctions imposed by the United States and its allies in the European Union.
“New Delhi is preparing a list of items it can export to Russia to narrow the about $5 billion trade deficit it runs currently, while considering making payments for crude oil in rupee,” the Times of India reported. “India wants a floating exchange rate, instead of a fixed one used by the two nations three decades ago, given the ruble has crashed in recent weeks.”
Bilateral trade between Russia and India stand at $10.8 billion, with both countries discussing the possibility of expanding India’s import of Russian oil.
Financial restrictions on Russian banks, prompted by the conflict in Ukraine, have caused massive disruptions in supply chains, driving up the price of commodities in developing nations like India.