New Delhi: Russia and India are working out a rupee-rouble payments transfer for the $5-billion dollar S-400 Triumf air defence system deal as the US sanctions on Russia remain a major obstacle in the way.
Speaking to a select group of journalists at Aero India 2019 in Bengaluru, Anatoly G. Punchuk, deputy director of Russian Federal Service for Military-Technical Cooperation, said, “Dollar is no longer the universal currency for trade in defence.”
Punchuk said it was decided by both India and Russia to make the payments in local currency for the S-400 deal.
S-400 is known as Russia’s most advanced long-range surface-to-air missile defence system that can take out targets over 350km away.
However, sources remained tight-lipped about the modes of payment that are being pursued for the deal.
Both India and Russia have in the past said US sanctions won’t affect the delivery schedule of the game-changing air defence system — its first regiment is scheduled to be delivered in October 2020.
US sanctions prevent financial institutions from dealing with Russian military firms and this has been an issue for the government of both countries.
‘Every deal is unique’
While both countries have decided to make payments in local currencies for the S-400 deal, it will not be the default option for future deals with Russia, said Punchuk, adding that both sides will discuss each deal and payment process separately.
“No, every deal is unique but this is a successful model and we have seen it in the past too,” said Punchuk.
“What is important is that the transaction system needs to be operationalised because transaction in national currency is a two-way street,” he said.
This will help Russia “fulfill its obligations”, added Punchuk.
Also read: Russia says US sanctions don’t matter, we’ll deliver S-400 missiles to India on time
Russia has been pushing for a rupee-rouble transfer as a payment system for the deal for the last few years, but India has been reluctant, given the depreciation in the Russian currency.
Sources said, according to the plan, any foreign currency other than the US dollar could be used as the benchmark for payments to be made.
Another way of making the payments relates to trade whereby Russia imports from India, say rice, but does not make a payment for it. The amount would then be adjusted with the payment to be made towards the S-400 deal, sources said.
China was the first foreign buyer to seal a government-to-government deal with Russia in 2014 to procure the lethal S-400 missile system. Moscow has already started the delivery of an undisclosed number of the missile systems to Beijing.
Also read: Indian Air Force wants to buy second lot of S-400 missile systems from Russia
The United States enjoys seigniorage of a stratospheric kind when the whole world uses the dollar as a unit of account, far beyond the normal privilege each central bank does when people accept coloured pieces of paper issued by it as a store of value. By acting with caprice on the issue of sanctions, it will strengthen a trend already underway for other currencies to take up part of the responsibility. Japan’s economy has been stagnant for two decades, the Euro has passed through harrowing times, the Chinese yuan is tightly controlled by the government. Over time, these constraints will be addressed.
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