For the growing hydrocarbon trade between India and Russia, the State Bank of India’s branches in Moscow and St Petersburg could be designated as the clearing houses for a possible mechanism to pay either in rupee or rouble, rather than in dollar.
This will be similar to the deal between China National Petroleum Corporation, China’s largest integrated energy company, and Russian energy giant Gazprom under which China can pay up to $400 billion in yuan for an estimated 38 billion cubic meters of Russian gas between 2018 and 2047.
According to officials, the proposed mechanism would be discussed when Prime Minister Narendra Modi and Russian President Vladmir Putin will meet for the 16th edition of the annual Indo-Russia summit. While ensuring energy security would be the main focus, the two leaders would hold exploratory meetings on “non-dollar hydrocarbons trade”. The idea is similar to the payment plans that India has with Iran: Rupee-rial.
Last month, when external affairs minister Sushma Swaraj was in Moscow for the 21st round of inter-governmental meet, sources told FE that “The two sides explored the idea of rupee-rouble trade and for this India and Russia may organise exchange trading of the two national currencies.”
In his remark in November, Russian first deputy minister of economic development Alexei Likhachev had stressed on the major difficulties the sides are facing in the transition to the bilateral trade and investment in their national currencies.
Both sides have already exchanged opinions on this issue and decided to speed up the transition process to rupee-rouble trade. “It may take some time before the sides work out a concrete mechanism to transition to mutual trade in national currencies of India and Russia,” the source added.
Currently, Russia accounts for less than 1% of India’s $70-billion oil imports this financial year. If this issue gets resolved, then the two countries may look at extending non-dollar deals in investment and trade across other energy areas like nuclear and renewable energy resources.