India is proposing to settle trade with Russia in rupees, according to a person with knowledge of the matter, as the South Asian nation presses ahead with purchases of oil and weapons from the sanctions-hit country.
New Delhi plans to use about $2 billion equivalent of rupees deposited at Russia’s state-controlled VTB Bank PJSC and Sberbank of Russia PJSC, the person said, asking not to be identified as the deliberations are private. A plan could be finalized soon as Russian officials are visiting the Indian capital this week, the person added.
India has previously used a rupee-ruble mechanism, which has fallen out of favor this time around due to extreme volatility in the Russian currency, the person said, adding that deposits in the Russian accounts could swell to $5 billion by year-end given how much India is buying.
Prime Minister Narendra Modi’s administration is keen to finalize a mechanism as India has been lifting imports of oil to take advantage of a dip in prices after US, Europe, Australia and Japan piled economic sanctions on Russia. Cheaper Russian crude can help India, which has seen inflation surge past the central bank’s target as oil rallies to nearly $130 a barrel.
Representatives for the Reserve Bank of India and Finance Ministry didn’t respond to emails seeking comment.
India had a trade deficit of $6.61 billion with Russia in the year ended March 2022, with total bilateral trade at $13.1 billion. New Delhi is working on boosting exports of products such as pharmaceuticals, plastics and chemicals to balance the books.
India, the world’s largest buyer of Russian weapons, has resisted pressure from the US and Australia to scale back its relationship. It has cited threats from Pakistan and China to argue its case for continued supplies, a move that prompted the US to consider extending foreign military finance to wean India away from Russia-made military hardware.
India has historically attempted a neutral stance on tensions between major powers, even as it has joined groups such as the Quad security alliance with Australia, Japan and the US.