Ruble and rupee lack reciprocity – Kommersant

Russian exports to India almost quadrupled from April 2022 to January 2023, according to the country’s Ministry of Industry and Trade. Such rapid growth was primarily provided by the supply of oil, coal and fertilizers. Imports from India, on the contrary, decreased, in particular, due to a decrease in supplies of machinery and equipment to the Russian Federation. Trade between countries is accompanied by difficulties with settlements – foreign banks often block payments, and the transition to rupees and rubles is limited due to the peculiarities of currency regulation and a strong imbalance in mutual supplies.

In 2022, Russia entered the top five largest trading partners of India, losing only to China, the United States, the United Arab Emirates and Saudi Arabia (in 2021, the Russian Federation was in 20th place), experts from the audit and consulting company Business Profile, who analyzed data of the Ministry of Industry and Trade of this country. From April 2022 to January 2023, trade between the countries grew to $39.8 billion. At the same time, Russian exports accounted for $37.28 billion (this is 6.2% of India’s total imports), despite the fact that for the entire previous financial year (it starts on April 1 in this country) the indicator amounted to $9.9 billion. Counter deliveries from India to the Russian Federation against the backdrop of sanctions, on the contrary, decreased – from $3.25 billion in 12 months of the previous financial year, to $2.5 billion in 10 months of the present. Russia mainly imports medicines from India (their deliveries exceeded the figure of the previous year), but the import of machinery and equipment has decreased by almost three times.

It should be noted that Russian exports traditionally exceeded Indian ones in bilateral trade. Against this background, at the end of last year, the share of Russian supplies in Indian oil imports began to increase sharply – according to OPEC, in February 2023 it was 5 million bpd, while the share of the Russian Federation reached 38%. In the 10 months of the fiscal year ending on April 1, Russian oil supplies amounted to $24.7 billion, and another $4 billion came from coal. As a result, the share of mineral products in total exports to India increased from 54% to 84% over the year. The chemical industry accounted for 7% (against 11%, we are talking mainly about fertilizers), for precious stones – 3% against 13% (this is, in particular, the supply of diamonds for cutting). India’s demand for oil is expected to continue to grow – this country is increasing production and exports of petroleum products to Europe against the backdrop of an embargo on the import of such products from Russia.

The pronounced imbalance of trade between Russia and India complicates the transition to settlements in national currencies – the rupees received from the sale of Russian goods cannot be spent on the purchase of products of Indian manufacturers (payments are mainly made in dollars). “The balance of trade would not be a problem if it were not for the sanctions imposed on Russian banks and the continuing risk of freezing Russian assets abroad by unfriendly countries,” Business Profile experts say.

After large Russian banks were disconnected from SWIFT and direct correspondent accounts with banks that were international settlement centers were closed, the terms for transfers under contracts increased from 30 minutes to 3–4 days. At the same time, Russian banks that continue to use SWIFT often face the fact that foreign banks reject transfers or block them, requesting confirmation of the legal origin of funds.

Unlike the yuan, which is traded on the Moscow Exchange and is used for payments in both directions, the popularity of the rupee is limited – its conversion into foreign currency is carried out only within India on the stock exchange or in authorized banks. The rupiah is limited convertible, and the exchange in large volumes requires the permission of the Indian regulator.

For settlements in national currencies, large Russian banks opened vostro accounts with authorized Indian banks – this is an active-passive account, through which operations are conducted in India in rupees and converted into rubles. However, the receipt of rubles in these banks can only be ensured by Indian exporters, who are few in number, so Russian exporters have to wait for rubles to appear in an Indian bank in order to receive payment for the delivered products, the authors of the review explain. They believe that Russian banks should be able to open counter accounts of “vostro” Indian banks, which could accumulate ruble liquidity in an amount sufficient to convert rupees coming from Indian imports. Parity mutual settlements of banks on vostro accounts and the conversion of rupees on the Indian stock exchange would save Russian exporters from the problems they face in trying to switch to using national currencies in settlements, Business Profile experts conclude.

Tatyana Edovina