India has a big problem with paying for Russian oil in rubles

Experts doubt the transition of countries to settlements in national currencies

India is in no hurry to switch to paying for Russian oil in rubles, as it doubts the economic feasibility of such a maneuver, reports the Indian newspaper The Economic Times. It is worth noting that the Asian state has been relying on approximately the same arguments for the past few years, slowing down the process of abandoning the dollar in mutual transactions. Experts do not rule out that Moscow will not wait for Delhi to pay for the “black gold” in rubles.

Delhi, as before, continues to pay for the supply of Russian hydrocarbons in dollars “through normal banking channels,” according to the Indian newspaper The Economic Times. The transition to payment in national currencies is delayed for two reasons.

Firstly, the owners of local factories processing raw materials from our country are afraid of another wave of Western sanctions against Russia, which may tangentially affect the South Asian republic. Secondly, according to Delhi, the transition to alternative settlements will definitely not be in favor of the Indian economy, since the trade turnover of both states cannot be called equivalent: the supply of Russian goods to the Indian market is many times greater than the reverse purchases. In particular, if until February India accounted for 2% of Russian oil exports, by September this figure increased to 23%.

Moreover, this year Russia came out on top among the suppliers of “black gold” to the Indian market, leaving behind traditional exporters – Iraq and Saudi Arabia. And Delhi is not going to give up our energy resources. Indian Foreign Minister Subramanyam Jaishankar, who recently visited Moscow, said that his country’s authorities intend to develop cooperation with Russia, especially in the energy sector. By the way, earlier Delhi said that he intended to keep his stake in Sakhalin-1 even after the other foreign participants left the project, including the American corporation ExxonMobil.

“We can assume what exactly does not suit Delhi in ruble calculations: the volume of exports of “black gold” from Russia to India in 2022 may exceed $20 billion. At the same time, the total volume of Russian exports to the Indian economy may reach $30-32 billion by the end of the year , and imports from India to Russia – only $ 4-5 billion. There is an extremely strong negative trade balance in India’s trade with Russia. Under such conditions, the rupee exchange rate against the ruble will inevitably and strongly weaken, leveling the benefits received from Delhi from discounts on Russian oil, ”notes TeleTrade analyst Alexei Fedorov.

Obviously, the situation with Russian-Indian trade in the national currency is not simple. “To this day, the parties have not been able to come to an understanding of the mechanism that would ensure an equal counter demand for the ruble and the rupee,” said Dmitry Alexandrov, head of the analytical research department at IVA Partners Investment Company. – An attempt to introduce an intermediate currency instead of the dollar also did not succeed. It is difficult to say whether the parties will agree in the end or not. So far, it is necessary for Russian exporters to increase profitable deliveries, occupy a niche, establish and expand logistics.”

On the one hand, India’s economy is growing at a rate of 7-8% per year and is in dire need of energy resources. On the other hand, Russia, due to Western sanctions and restrictions, is in dire need of markets for its oil. It turns out that India and Russia are an ideal “oil union”, which they do not refuse for economic reasons. As a last resort, in case of disagreement over the choice of currency for trade, Moscow and Delhi will continue to trade oil in dollars until they find mutually acceptable terms.

“If, because of the policy of the country, they nevertheless refuse to trade oil that is so beneficial for each other, then Russia will have to look for other sales markets and lose hundreds of millions of dollars on discounts,” predicts Fedorov. “True, India’s losses will be much greater, because Indian companies are unlikely to find such cheap energy resources on the world market and lose super profits from the resale of finished fuel.”

As the economist, director of communications at BitRiver Andrey Loboda recalls, this year for the first time the fact that Moscow and Delhi are studying the possibility of calculating in national currencies was discussed in April. Many gave optimistic reviews – soon both countries will abandon the dollar, thus hurting the American economy. “However, if you go a little deeper into history, you can find statements that are exactly reminiscent of current maxims. For example, in 2014, Vladimir Putin, at a meeting with Indian Prime Minister Narendra Modi, also spoke about the active use of national currencies in mutual settlements. But things are still there. Therefore, every day less and less is believed in the implementation of such an idea.