Today, Thursday, May 4 (2023), it was reported that negotiations between Moscow and New Delhi on a bilateral trade settlement in Indian rupees are on hold, which constitutes a major setback for Russian oil and coal importers, but Russian officials quickly dispelled these allegations.
They denied the allegations of suspending the rupee trade talks, describing them as “pure wishful thinking”, noting that there has been no change in the bilateral negotiations between the two countries, according to what was reported by the Asia News International (ANI).
Despite Russia’s denial of suspending negotiations with India, it appears that it is facing many problems and challenges.
These reports came after months of negotiations that failed to persuade Moscow to keep the rupee in its coffers, according to what was seen by the specialized energy platform.
Commenting on media reports claiming that India, Russia suspended talks to trade in Rupees, Russian official says “No change in bilateral developments, Wishful thinking by Western news agencies”
– ANI (@ANI) May 4, 2023
Conflicting news
Meanwhile, Western reports quoted Indian government officials as saying that Russia does not feel comfortable and is willing to pay in other currencies.
The move is a major setback for discount Russian oil and coal importers, who have been waiting for a permanent payment mechanism in Indian rupees to help reduce currency conversion costs.
Given the large trade gap in favor of Russia, Moscow believes it will end up with an annual surplus of the rupee of more than $40 billion, when such a mechanism is put in place, and felt that the accumulation of the rupee was “undesirable”. This May.
It should be noted that India’s share of world merchandise exports is only about 2%, and these factors reduce the need for other countries to hold the rupee.
Settlement mechanism in Indian rupees
India began exploring a rupee settlement mechanism with Russia after the invasion of Ukraine in February last year, and an Indian rupee deal has not been announced.
Most business transactions are conducted in dollars, and large amounts are paid in other currencies, such as the UAE dirham.
The Indian and Russian sides have endeavored to facilitate trade in local currencies, but the governing guidelines have not been formalized.
It seems that Russia is not comfortable with keeping the rupees, and wants to pay it in Chinese yuan or other currencies, according to an Indian government official, who was involved in discussions on settling payments between the two countries, which represents a major crisis for Russian oil and coal importers.
While some of them refuse to expand the settlement of the Indian rupee any longer, and consider this mechanism inappropriate, according to an Indian source with direct knowledge of the developments, as he indicated that India did everything in its power to make this work a success, but it was not successful in that.
Since Russia’s invasion of Ukraine on February 24 last year (2022), India’s imports from Russia have risen to $51.3 billion as of April 5, from $10.6 billion during the same period a year earlier, according to another Indian government official.
Discounted Russian oil made up a large portion of India’s imports, jumping 12-fold over that period.
The Indian official said that exports from India during the same period declined slightly to $3.43 billion, from $3.61 billion in the previous year.
Another official added that the two countries began searching for alternatives after the failure of a settlement mechanism in Indian rupees, without giving details.
The trade continues
Trade with Russia appears to be continuing despite the sanctions and payment issues, according to the Indian sources familiar with the matter.
“Currently we make some payments in dirhams and a few other currencies, but the majority is still in dollars… The settlement is done in different ways, with the help of other countries,” said one of the government officials.
The officials said that Indian merchants are currently processing some trade payments outside Russia, with the help of third parties to settle trade with Moscow.
On the other hand, there is no prohibition on dealing with other countries through the system of financial transfers and transactions between banks (SWIFT).
Therefore, the payments are made to a third country that directs or reimburses them for their trade with Russia, according to an Indian government official.
Asked whether the money was channeled through China, the official said: “Yes, including China.”
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