New Delhi, Aug. 12: India is exploring the possibility of replacing the dollar and euro with the rupee and rouble in its trade with old ally Russia — a move that would be tantamount to throwing a lifeline to Russian President Vladimir Putin, increasingly cornered by western sanctions.
New Delhi and Moscow have decided to set up a panel of experts from banks from the two nations that may be willing to trade in the national currencies of India and Russia, senior officials from both countries have confirmed to The Telegraph.
Russia already has such a mechanism in place with China, and a direct payment structure with India will further reduce Moscow’s dependence on the US dollar at a time Washington and its European allies are ramping up sanctions against it.
India, a votary of such mechanisms with as many major countries as possible, will also gain because of the immunity payments in national currencies bring from fluctuations in currency market pegged at the dollar.
“The way we see it, it’s a win-win,” a Russian official said. “And it will demonstrate the strength of our bilateral ties.”
In absolute numbers, Russia doesn’t even figure among India’s top 15 trading partners. The annual bilateral trade between the nations is just over $10 billion — compared to the $100 billion trade India enjoys with both the US and China. But the traded commodities include key technology and military equipment that are on their own costly.
The decision to set up the expert panel to explore the proposal for trade in national currencies was taken at a meeting between the RBI executive director, G. Padmanabhan, and the first deputy chairperson of the Bank of Russia, Ksenia Yudayeva, in Moscow in late July, officials said.
India has refused to back western sanctions against Russia over the past year, both under the previous UPA regime and the current Narendra Modi government. New Delhi has said it opposes all “unilateral” sanctions imposed by one group of countries against another — and will only accept sanctions approved by the UN. Russia holds a veto at the UN Security Council, making any such UN sanctions a non-starter.
Even as the US and the European Union ramped up additional sanctions against key aides of Putin last month, Prime Minister Modi referred to Moscow as India’s “best friend” when he met the Russian President in Brazil on the margins of the BRICS summit.
But the Modi government is also trying to rebuild a frayed relationship with the US, where India’s warmth towards Putin has few sympathisers.
Modi is scheduled to visit the US from September 26-30 to attend the UN General Assembly session and hold bilateral summit talks with President Barack Obama in Washington.