India-Russia Trade Halted.
After months of negotiations that failed to persuade Moscow to maintain rupees in its coffers, India and Russia have given up on attempts to settle bilateral commerce in the currency.
Points to Ponder:
- According to two Indian government officials and a person with firsthand knowledge of the situation, India and Russia have been attempting to negotiate for months to settle their bilateral trade in rupees but the attempts have been put on hold.
- This result is considered a huge setback for Indian importers of inexpensive oil and coal from Russia who were hoping for a rupee payment mechanism to assist decrease currency conversion expenses.
- Moscow has a huge trade deficit with Russia and anticipates that if such a mechanism is developed, it will end up with an annual rupee surplus of over $40 billion. The accumulation of rupees, however, is perceived as “not desirable”.
- Since India only exports about 2% of the world’s total goods, the rupee is not fully convertible, which lessens the need for other nations to hold rupees.
- Soon after Russia invaded Ukraine, India began looking at rupee as a settlement system with Russia. The most common currency for trade is the dollar, however, currencies like the dirham of the United Arab Emirates are used more and more.