India and Russia have suspended efforts to settle bilateral trade in rupees after months of negotiations failed to convince
Moscow to keep rupees in its coffers, two Indian government officials and a source with direct knowledge of the matter said.
This would be a significant setback for Indian importers of cheap oil and coal from Russia who were awaiting a permanent rupee payment mechanism to help lower currency conversion costs
Reuters was informed by an Indian government official who requested anonymity that Moscow believes it would receive an annual surplus of over $40 billion in rupees. If a mechanism is established due to the high trade gap in favor of Russia.
The official added that Moscow perceives rupee accumulation as ‘undesirable’.
India’s finance ministry, the Central Reserve Bank of India and Russian authorities did not immediately respond to requests for comment.
The rupee is not fully convertible. India’s share of global exports of goods also is just about 2%. And these factors reduce the necessity for other countries to hold rupees
After the invasion of Ukraine in February last year. India began exploring a rupee settlement mechanism with Russia
The two sides discussed the possibility of enabling trade in local currencies. But they did not formalize any guidelines.
A second Indian government official, who participated in the discussions, said that Russia is not at ease with holding rupees and prefers to receive payment in Chinese yuan or other currencies.
“We don’t want to push rupee settlement any more, that mechanism is just not working.
A third source who has direct knowledge of the developments stated that India has made every effort possible to make this work but it has not been successful.
Since Russia’s invasion of Ukraine on Feb. 24 last year, India’s imports from Russia have risen to $51.3 billion. Until April 5, from $10.6 bln in the same period in the previous year, according to another Indian government official