The negotiations between India and Russia on Russia’s accumulated rupee surpluses, equivalent to tens of billions of dollars, have been underway all year.
This planning is significant because so many of the nations which want to trade in their national currencies want to do so in unbalanced trade relations—and none more so than Russia and India. In 2023 it is projected that Russia-India trade will be equivalent to $44 billion, with Russia’s exports so far being 4.5 times (by value) its imports from India; by the end of the year the ratio is likely to be nearly 5:1. That is fundamentally why simply trading with the ruble and rupee has not functioned. Trillions of surplus reserves of rupees sit in the specially created “vostro” accounts of Russian exporters (or of their banks) in Indian banks, with no arrangement to repatriate them to Russia nor feasible use for them there.
India proposed a free trade zone to Russia in May, and in July the Reserve Bank of India published a “framework” which emphasized “capital payments for projects and investments,” but also suggested simply investing in long-term Indian government bonds (rather than short-term government bonds, which the Russian banks have been buying with speculations in mind). The rupee surpluses, if invested directly or indirectly in Indian infrastructure builders’ bonds, could sprout green shoots of development projects in Russia’s Far East, where India has already begun to invest.
