Ignoring West's Sanctions, India Plans To Use Rupee Payments To Continue Trade With Russia

India is working out a method to facilitate trade with Russia using local currencies, with a decision expected as early as next week.

The State Bank of India (SBI), in a report, said that countries proposing rupee-rouble or yuan-rouble trade to bypass Western economic sanctions on Russia for invading Ukraine are an opportunity for the internationalisation of the Indian currency.

Internationalisation means a currency can be freely transacted by both resident and non-residents, and be used as a reserve currency for global trade.

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“An interesting anecdote, the hegemony of US $ appears likely to continue in next few decades, notwithstanding the alternate settlement mechanism being envisaged by select nations desirous of continuing inter-territorial trades of compulsory nature, circuiting around the western sanctions as backdoor talks gather momentum for rupee-rouble or yuan-rouble settlements globally, with some enthusiasts betting for gold settlements too!” said Soumya Kanti Ghosh, group chief economic adviser at SBI, in the report.

“This, however, should present the moment of reckoning for the internationalisation of rupee too, underpinning the need to evolve alternate payment and settlement mechanisms. Let us grab the iron when it is hot!” said the report.

United States, European Union and other Western countries have imposed sanctions and cut off Russia from the Swift Payment system and bust Moscow’s trade with other countries.

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Russian deputy prime minister Alexander Novak last week spoke to Minister of Petroleum minister Hardeep Singh Puri and offered more oil to India. “The parties discussed current and potential joint projects in the fuel and energy industry and noted that current projects continue to be steadily implemented,” the Russian government said in a statement. Russian firms are also offering huge discounts for crude oil to India.

The Reserve Bank of India’s (RBI) Currency and Finance report last year said that the internationalisation of the rupee is “inevitable” but that would complicate monetary policy.

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