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Rupee-rouble romance was for Soviet era. Not trade option now for India-Russia

India looking at 'several options' to do business with Russia in light of the economic sanctions slapped on the country by the US and the European Union over its war on Ukraine. 

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New Delhi: India is mulling “several options” to do business with Russia in light of the unprecedented economic sanctions slapped on the country by the US and the European Union over its war on Ukraine. 

However, the government is apprehensive whether the traditional rupee-rouble mechanism of payment would be feasible in today’s day and age.

The rupee-rouble mechanism had existed in the Soviet era and was designed to bypass the US dollar owing to tensions between Washington and Moscow, which date back decades. Under this system, India paid in rupees for the items it purchased from Russia, equivalent to the value of the product in roubles.

The rupee-rouble mechanism also worked in the form of the traditional barter system, under which Russia could import items from India worth the same value that New Delhi would procure from Moscow.

“The mechanism is being studied… There is no clarity on the sanctions yet. This is too early to conclude anything,” said a source involved in studying the issue. “A rupee-rouble mechanism does not seem viable at this point of time because of currency fluctuations. No decision has been taken.”

According to the source, India may be working out some other mechanism altogether after the government concludes its in-depth analysis of the sanctions, led by the Ministry of Finance.

“In the past, we’ve had with the Soviet Union, perhaps with Russia later on, a mechanism of rupee-rouble. I am not aware of its current status,” Ministry of External Affairs (MEA) spokesperson Arindam Bagchi said at the media briefing Thursday.

“Let me make a larger point which I’ve been repeatedly saying — we will await details of any unilateral sanctions, the exact details, to examine their impact on our economic exchanges with Russia,” he added. “The rupee-rouble mechanism exists but I don’t know to what extent it will be used now and whether it’s even feasible.” 

Also read: India expects West sanctions on Russia to impact key sectors, defence, engg could take big hit

‘Exploring all possibilities on oil imports’

On the issue of India’s potential plans to import oil and gas from Russia, the MEA said Thursday that, as an oil-importing country, India constantly explores supplier options.

“India does import most of its oil requirements. So, we are always exploring all possibilities in the global energy market because of this situation that we face importing our oil requirements. I don’t think Russia has been a major supplier,” said Bagchi.

He added, “Let me just highlight that there are a number of countries that are doing so (importing oil and gas from Russia), especially in Europe… We need the energy.”

Last week, Hardeep Singh Puri, Minister of Petroleum and Natural Gas, had a telephonic conversation with Deputy Prime Minister of Russia Alexander Novak on bilateral cooperation in fuel, energy and education.   

(Edited by Saikat Niyogi) 

Also read: On Russia, PM Modi’s language isn’t too different from that of Nehru and India will pay costs


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