India Explores Payment Options For Trading With Russia


India is examining all possible payment mechanisms for continuing trade with Russia, including the one adopted to settle payments with Iran. Foreign banks that don’t have operations in countries that have imposed sanctions on Russia or routing payments through Russian banks unaffected by the curbs are among the options under consideration. Third-country banks were used to settle trade with Iran.

Two major Russian banks, Sberbank and Gazprombank, are currently exempted from sanctions because they are the main channels of payment for EU’s gas and oil imports from Russia.

“We are looking into this. Even if these banks face sanctions from the US, payments can be made in euros as these transactions are still being carried out until further sanctions,” said a government official, adding that the full impact of the restrictions is yet to be felt. Another option under consideration is the mechanism used to repay Russian debt through a rupee auction held by the Russian central bank. The repayment is made through the export of identified commodities and services.

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Bilateral trade between India and Russia is about US$ 10 billion, 1.3% of India’s total trade. The Reserve Bank of India and the government are in constant touch over developments as they look to contain the fallout and ringfence the economy.

China route for shipments to CIS countries
Indian exporters have sought resumption of exports to the Commonwealth of Independent States (CIS) countries through China, following Russia’s invasion of Ukraine. The CIS countries include Ukraine, Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan and Uzbekistan. Exports to these nations have stopped as there is no movement of ships through the Black Sea.

The proposed route – India to Qingdao by ship and from there on to CIS by railways – has been non-operational for over a year.

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At present, a large volume of cargo exported to the CIS countries moves via Russian Railways. “We have proposed this route via China to CIS countries as Indian banks will be reluctant to deal with documents showing en-routing through Russian ports for CIS-destined goods,” said an exporter.

“We should explore the possibility of restarting exports through Qingdao by discussing with a few major shipping lines or Container Shipping Lines Association,” said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO).

An industry representative said the government has the option of reviving the Rupee-Ruble mechanism even though a similar one with Iran had limited success as many buyers had expressed their inability to make payments in a foreign currency or from a third country. Exporters have suggested using the Russian currency for such payments.

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They also sought all export benefits for payments received in that currency as is currently available for exports in free foreign exchange. A blocked transit route is not only impacting current exports but the possibility of increased shipments.

Meanwhile, Department of Commerce/DGFT has operationalised a helpdesk to support and seek suitable resolutions to issues related to India’s international trade in this regard with immediate effect.


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