Media reports Russia, India eyeing new mechanism to sidestep dollar

(MENAFN) India and Russia are considering establishing a benchmark rupee-ruble exchange rate to facilitate direct trade between their currencies, aiming to circumvent the barriers imposed by Western sanctions on Russia. This initiative is set to be discussed during the upcoming visit of a deputy governor from the Reserve Bank of India (RBI) and senior officials from Indian state-owned banks to Moscow, as reported by the Economic Times (ET).

The move reflects a broader trend of increasing trade between India and Russia, particularly since the imposition of sanctions related to the conflict in Ukraine in 2022. India has become the second-largest buyer of Russian crude oil, following China. Imports of Russian goods to India have surged dramatically—by about 8,300 percent since 2021—primarily due to strategic oil purchases, while Indian exports to Russia have risen by 59 percent.

The RBI has recently sought input from both local and Russian banks, as well as financial institutions involved in mutual trade, regarding this proposed currency exchange mechanism. Currently, transactions between the two nations rely on the dollar for currency conversion, a process complicated by the exclusion of several major Russian banks from the SWIFT international payment system.

By creating a direct trading mechanism between the rupee and the ruble, India and Russia aim to enhance their economic ties while navigating the challenges posed by the existing global financial system. This initiative underscores the strengthening of bilateral relations and the strategic adjustments being made in response to international economic pressures.

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