Russia is clueless about 147 billion dollars in rupees got from India
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seems to pile up every month
A Bloomberg report claimed that Moscow is currently accumulating rupee assets worth one billion dollars every month. But it is stuck outside the country due to one-sided trade relations. Every quarter, the trade imbalance is expected to reach $2 billion to $3 billion, and Russia can’t even use it.
During the year 2022, an estimated $147 billion would have been added to the net foreign wealth created abroad. The amount stuck with Russia is huge. This can be gauged from the fact that Russia will spend 5.51 trillion rubles or $68 billion on defense in the year 2022. This information has been given by Reuters.
India and Russia failed to find alternatives
Both Russia and India have been unsuccessful in finding an alternative. One way is to set up various payment mechanisms on behalf of Russian entities, including investing in India’s capital market. However, the solution is not easy as Russia cannot use the entire tranche. India currently has restrictions on capital inflows from foreign investors. Another option is to use a third country’s currency, such as the Chinese yuan or the UAE dirham. The likelihood that such a solution will be agreed upon is extremely slim.
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Will banks accept rupees?
Russian economist Alexander Isakov, associated with Bloomberg Economics, said, ‘Russia’s trade with India is becoming increasingly imbalanced. Exports from Russia to India have increased but imports have not picked up that much. Russia has a limit to save its current account surplus in rupees. He said that Russia has no alternative oil importers equal to India’s capacity. As such, exporters and banks will gradually accept settlement in rupees, it seems.
Even if India wants to increase its oil imports, Moscow has done nothing to strengthen that sentiment by reducing the discount on oil prices. A report has recently claimed that New Delhi will get huge discounts during FY23 due to Chinese demand and eventual cutbacks from oil producers.
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