India May Be Mulling a Ruble-Rupee Payment System for Trade with Russia

India is in intensive discussion through an Intergovernmental Panel of leading ministries and Indian banking circles to work through a method to potentially set up a Rupee-Ruble Payments System for trade with Russia, as the system would bypass use of the Dollar. As well, it could be a step, partially, past the Dollar-dominated floating Exchange Rate Financial System.

In an article, entitled ‘India Is Considering Rupee Payments for Trade with Russia’, Bloomberg News reported on March 11 (2022) that “India is working out a mechanism to facilitate trade with Russia using local currencies, with a decision expected as early as next week, according to people familiar with the matter.” The article continued that the Indian “Government is discussing how trade can be settled in Rubles and Rupees, as Indian exporters are awaiting payments (from Russia) of about USD 500 million that have been stuck after the sanctions on Russian banks, said the people, who asked not to be identified before a final decision is made.” At the same time, the Hindustan Times daily reported that India was anxious to buy “potassium chloride (popularly known as muriate of potash), a key fertiliser and sunflower (edible) oil” from Russia for its upcoming agricultural planning and the nation’s food security.

However, these operations are blocked, because the punitive US sanctions forbid the use of the dollar for payment.

Hindustan Times further reported that Economic Affairs Minister of India Ajay Seth heads up Prime Minister Narendra Modi’s Intergovernmental Panel made up of eight ministries, which is consulting with the Reserve Bank of India (RBI, the Central Bank of India), the State Bank of India, a public bank; and the small, but important UCO Bank.

The context for this is that India abstained on the US’ resolution brought before the UN General Assembly on March 2 that “deplore(d) in the strongest terms” Russia’s alleged aggression against Ukraine. The March 13 edition of the British Monarchy-allied Economist magazine condemned “India’s coddling of President Putin”.

India has a history of moving outside the bounds of the US Dollar. In November 2018, India had signed an agreement to purchase oil from Iran, which the US had heavily sanctioned, and carried out the deal not in US Dollars, but in the two countries’ national currencies. The US was forced to give India a waiver for the deal. Reportedly, India’s payment for Iran’s crude oil was transacted through India’s UCO Bank, the same bank that is engaged in current consultations on an Indian Rupee-Russian Ruble deal. UCO Bank, which has little Dollar exposure that can be sanctioned, was founded by G D Birla, a close associate and supporter of Mahatma Gandhi.

In December 2018, India had also signed a deal to purchase Russia’s S-400 Ground-To-Air Missile Defence System, despite an intense US threat of sanctions. The deal was contracted therefore in Indian Rupees.

India and Russia have a long-standing “privileged special relationship”. Importantly, Russian President Vladimir Putin travelled to New Delhi on December 6, 2021 for a meeting with his “good friend” Prime Minister Narendra Modi.

In an article for Northlines – titled ‘Crisis as an Opportunity: Rupee-Rouble Trade Should Become Template To Break US Hegemony’, Chennai-based Chartered Accountant S Murlidharan stated: “By institutionalising Rupee-Rouble Trade, we would be sending a strong signal that… the world could well one day break free at least partially from the vise-like grip of the greenback on fortunes of other nations.”

One stumbling block reported by participants in these discussions is how to set a Parity Rate between the Rupee and the Ruble, since they currently each float against the Dollar. This particular issue can only be settled through the new security and financial architecture proposed by Schiller Institute Chairperson Helga Zepp-LaRouche.

Boundless Ocean of Politics has received this article from Christopher Lewis of Schiller Institute, Frankfurt, Germany.

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Published by Koushik Das

Koushik Das (born on May 16, 1976 in Kolkata) is a career journalist. Based in the Indian capital of New Delhi, Koushik writes mainly about foreign policies and current geopolitical issues, and rarely about other topics. His own political ideas are highly influenced by Antonio Gramsci, Louis Althusser, Michel Foucault, Michael Oakeshott and others. English philosopher and political theorist Oakeshott (Dec 11, 1901-Dec 19, 1990) says that “in political activity, men sail a boundless and bottomless sea. There is neither harbour for shelter nor floor for anchorage, neither starting-place, nor appointed destination. But we have to keep afloat”. (Rationalism in Politics, 1962) As a student of Political Science, Koushik loves to share his views on issues, which have great impacts on his thought process (and also on India, South Asia and of course on the global community), with his readers through his website – Boundless Ocean of Politics. By doing so, he tries to keep himself afloat. You will find some of his articles in https://inserbia.info/today/ (https://inserbia.info/today/author/kou_das13_i/), as he has been trying to assess the global geopolitics since 2003. You can also mail him at kousdas@gmail.com View all posts by Koushik Das