India is expected to announce a payments agreement that would allow trade with Russia to continue, the president of an Indian exporters’ association told CNBC’s Street Signs on Wednesday.
The so-called rupee-ruble trading mechanism could come as soon as next week, according to A Sakthivel, president of the Federation of Indian Export Organizations (FIEO).
FIEO, a government-backed association representing over 200,000 exporters, oversees India’s export promotion councils.
India’s Treasury Ministry and Reserve Bank of India have so far not commented on the mechanism, which would allow Indian exporters to continue doing business with Russia even after Western sanctions restricted international payment mechanisms. The deal would also allow India to buy Russian energy exports and other goods.
Sakthivel said the Indian government is working on a proposal to allow four to five nationalized Indian banks to participate in the trade and there have been consultations between the central bank governor, the finance minister and the banks.
Sakthivel added that the international sanctions against Russia offer Indian exporters an opportunity to expand in the Russian market. “Export to Russia is not much, only in agricultural and pharmaceutical products. Now that the entire West is banning Russia, there will be many opportunities for Indian firms to invade Russia,” he said.
provoke the West?
However, continued trade with Russia risks angering Western nations, including the United States, which has imposed sanctions on Moscow over its invasion of Ukraine. The US is India’s largest export market. According to official data of India, trade between India and the US in calendar year 2021 was US$112.6 billion, consisting of US$71 billion in exports and US$41 billion in imports.
Figures for Russia are far lower as India exported $3.3 billion worth of goods to Russia in 2021, mostly pharmaceuticals, tea and coffee. Imports were estimated at $6.9 billion, including armaments, minerals, fertilizers, metals and precious stones.
India and Russia have a historically close relationship dating back to the Cold War. India relies heavily on Russian arms, with about 85% of its military equipment coming from there or from countries that were once part of the Soviet Union.
India has not confronted Russia about the invasion of Ukraine and has abstained in three recent UN votes to deplore the war.
Asked about the possible US impact on trade with Russia, Sakthivel said he was confident that India had taken a “neutral stance” on the war in Ukraine. “The government will take all factors into account. The government is very cautious,” he said.