A RUPEE-ROUBLE STALEMATE

INDIA-RUSSIA TRADE

- M.G. Arun

Two months after the Reserve Bank of India (RBI) authorised Indian banks to open vostro accounts in a foreign partner bank (in this case, Russian) where payments for imports could be made in rupees, the latter remain hesitant to do so, worried as they are about widening western sanctions. A vostro account is one a bank holds on behalf of another bank in a different country. With banks reluctant, and an exchange rate yet to be fixed for a rupee-rouble trade, the stalemate could dampen trade ties between the countries, caution experts.

In March, when the US and other western nations imposed sanctions on Russia after its invasion of Ukraine, several Russian banks were cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) payments system. The idea was to stop Russia from operating worldwide and effectively block its exports and imports. However, India continued to trade with Russia, and even imported more crude oil from them as it got big discounts at a time when oil prices had hit $130 a barrel on war concerns. It was then that the idea of a rupee-rouble trade between the two countries was mooted.