The government is studying a payment mechanism for importing oil from Russia in view of the sanctions imposed by the United States and European countries following Moscow’s attack on Ukraine.
With the sanctions imposed on Russia, the scope of a local currency payment mechanism has shifted from a means of supporting ongoing trade to opportunities for deeper engagement, including increasing bilateral trade.
“We heard that ruble payment is being done by Europe. India used to have a ruble payment structure. I don’t think we’ve come to a decision yet. Some discussions are going on,” they said. sources said.
Any such payment mechanism involving rupee and ruble payments for imports and exports would help circumvent the sweeping economic sanctions imposed on Russia by Western countries, including freezing the individual accounts of many key Kremlin officials and the removal of Russian banks from the SWIFT international payment gateway.
“We already have a mechanism. We need to see if the existing system is viable in the current global situation. We are exploring that and other related things,” sources said.
Asked whether India can increase its dependence on Russia for its oil needs if Moscow provides a rate lower than the prevailing international rate, sources said it was subject to the elaboration a payment mechanism.
India’s major imports from Russia include fuels, mineral oils, pearls, precious or semi-precious stones, nuclear reactors, boilers, machinery and mechanical appliances, electrical machinery and equipment, and fertilizers.
India’s major export products to Russia include pharmaceuticals, electrical machinery and equipment, organic chemicals, and vehicles.
Also in the past, India had devised a mechanism to pay for imports from Iran when sanctions were imposed on the Persian Gulf nation.
India had entered into an agreement with Iran to carry out trade-related transactions through a rupee account held with a state-owned lender.
In accordance with the mechanism, Indian importers deposited the rupee payments into the Iranian banks’ “vostro” account, maintained with India’s state-owned lender UCO Bank for imports, including crude oil.
The account was also used to make payments to Indian exporters for sending goods to Iran and payments were settled daily.
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