Is the Rupee-Rouble Trade Arrangement in Trouble?

Without involving the US dollar, ten months ago, it seemed straightforward price

- Dr TK. Jayaraman

However, the situation changed when the war broke out between Russia and Ukraine, leading the US and its allies to prohibit Russia from exporting crude at a price exceeding US$60 per barrel. The intention behind setting a price cap was to prevent Russia from utilizing export earnings, including dollars and other hard currencies, to finance the war against Ukraine. India was eager to take advantage of this opportunity to purchase crude at a lower price, given that the global crude prices ranged from $110 to $123 per barrel, and the war posed a threat to supply chains. Additionally, there were efforts to restrict foreign exchange reserves held in dollars.

As a further measure, payments to Russia were banned from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system. Since most international payment settlements rely on SWIFT, conducting business with Russia became exceedingly challenging. Nevertheless, alternative methods were employed successfully, such as utilizing third parties for customary payments involved in global commodity trading, where specialized trading houses facilitated trade between countries. Unlike the punitive measures taken against Iran, these efforts were less severe. The current situation does not pose such a dire threat.