Russia has Large amounts of Indian Rupees that it can’t Use
Foreign Minister Sergei Lavrov has stated that Russia has amassed large amounts of rupees in Indian banks as a result of a growing trade surplus between the two countries. However, Lavrov has expressed concern over the inability to use this money and explained that the issue is being discussed, as the rupees need to be converted to another currency before they can be utilized.
This problem was highlighted during Lavrov’s discussion with reporters at the Shanghai Cooperation Organization meeting in India’s western state of Goa.
Large amounts of Indian Rupees that Russia can’t Use
- India’s exports to Russia decreased by 11.6% to $2.8 billion during the first 11 months of the 2022-23 fiscal year, while imports increased almost five times to $41.56 billion, as per data from the Ministry of Commerce and Industry.
- This rise in imports is due to Indian refiners purchasing discounted Russian oil, which has been ignored by the West due to President Vladimir Putin’s invasion of Ukraine.
- In April, imports of Russian crude by India hit a record high of 1.68 million barrels per day, marking a sixfold increase from the previous year, according to Vortexa Ltd, a data intelligence firm.
- Initially, the Kremlin supported the idea of India trading in their respective currencies after Russian banks faced sanctions and the use of the SWIFT messaging system was banned.
- However, due to instability in the ruble following the start of the conflict, the proposed plan to use a rupee-ruble mechanism for oil imports was discarded.
- Despite pressure from the US to reduce ties with Moscow after the invasion of Ukraine, India has not complied.
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Russia: India’s Largest Provider of Military Equipment
- Although Russia is India’s largest provider of military equipment and weaponry, the delivery of defense supplies has halted due to the lack of a payment system that doesn’t infringe on US sanctions.
- India owes more than $2 billion for weapons purchases, but it has been unable to pay in US dollars for fear of violating secondary sanctions, and Russia is reluctant to accept payment in Indian rupees.
- In a separate matter, Indian oil refiners have been attempting to pay for discounted crude using a mix of United Arab Emirates dirhams, rubles, and rupees, which can be exempted from international sanctions if priced below $60 a barrel.
- Indian banks have established special vostro accounts with Russian banks such as Sberbank and VTB Bank to facilitate overseas trade in rupees and keep the flow of crude oil moving.
However, the Russian exporters face challenges in repatriating the rupees due to currency restrictions, as highlighted by the Governor of the Bank of Russia, Elvira Nabiullina, on April 28.
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