India is in intensive discussion through an intergovernmental panel of leading government ministries and Indian banking circles to work through a method to potentially set up a rupee-ruble payments system for trade with Russia, that would bypass use of the dollar. As well, it could be a step, partially, past the dollar-dominated floating exchange rate financial system.
On March 11 Bloomberg News, in an article entitled “India Is Considering Rupee Payments for Trade with Russia, Sources Say,” reported 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 continues 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 $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 reports, India is anxious to buy from Russia “potassium chloride (popularly known as muriate of potash), a key fertilizer and sunflower (edible) oil,” for its upcoming agricultural planning and the nation’s food security.
But these operations are blocked, because the punitive United States’ sanctions forbid the use of the dollar for payment.
Hindustan Times reports that Economic Affairs Minister Ajay Seth heads up Indian 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); 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 United States’ resolution brought before the UN General Assembly 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 Mr. Putin.”
