Russia says it has billions of Indian rupees which it cannot use

“It is a problem,” Lavrov told reporters on the sidelines of a Shanghai Cooperation Organization meeting in India’s western state of Goa. Discussions are on now.”

total export of india Russia In the first 11 months of the 2022-23 financial year, exports fell 11.6% to $2.8 billion, while imports grew nearly five-fold to $41.56 billion, according to commerce and industry ministry data. The surge came as Indian refiners over the past year secured discounts on Russian oil that were discarded by the West in response to President Vladimir Putin’s invasion of Ukraine.

Russian crude imports by India reached a record 1.68 million barrels a day in April, more than six times higher than a year earlier, according to data intelligence firm Vortexa Ltd.

The Kremlin initially encouraged India to trade in national currencies after imposing sanctions on Russian banks and a ban on transactions using the SWIFT messaging system.

But the instability of the ruble soon after the start of the war meant that plans for a rupee-ruble mechanism for oil imports were abandoned. India has resisted US pressure to downgrade ties with Moscow since its invasion of Ukraine.

‘Frozen Fund’

The trade imbalance for Russia means “the amount of frozen funds could reach tens of billions of dollars,” said Alexander Nobel, director of the Institute of International Economics and Finance at the Ministry of Economic Development. India’s historically high overall trade deficit, which reduces prospects of clearing settlements with third countries.”

Russia is India’s largest supplier of arms and military hardware, although defense supplies to the South Asian nation have been held up due to the lack of a payment mechanism that does not violate US sanctions.

Indian payments for arms worth more than $2 billion have been stuck for nearly a year as New Delhi is unable to settle the bill in dollars due to concerns of violating secondary sanctions, while Russia is reluctant to accept rupees for the purchase. Is.

Indian oil refiners are trying to settle payments for subsidized crude oil using the UAE dirham, ruble and rupee. Trades can be exempt from international sanctions if their price is below the $60-per-barrel price cap set by the Group of Seven countries and their European Union partners.

Indian lenders opened special vostro accounts in Russian banks, including Sberbank PJSC and VTB Bank PJSC, to facilitate foreign trade in rupee and maintain crude oil flows.

Currency restrictions mean Russian exporters face difficulty repatriating the rupee, Elvira Nabiullina, governor of the Bank of Russia, said on April 28.

More stories like this are available at bloomberg.com

©2023 Bloomberg L.P.