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Russian Foreign Minister Sergey Lavrov has admitted that the country's large accumulation of Indian rupee has become a problem. Speaking to reporters on the sidelines of a meeting of the Council of Foreign Ministers of the Shanghai Cooperation Organisation (SCO) in Goa, Lavrov stated that discussions on how to use the currency are ongoing. He revealed that Russia accumulated billions of rupees in Indian bank accounts, but to use this money, it needs to be transferred to another currency.
India, Russia Deny Reports of Suspended Talks
Lavrov's remarks came a day after news agency Reuters reported that India and Russia had suspended efforts to settle bilateral trade in rupees after months of negotiations failed to convince Moscow to keep rupees in its coffers. However, later, both countries denied the report.
India began exploring a rupee settlement mechanism with Russia shortly after the invasion of Ukraine in February last year. However, most trade continues to be conducted in dollars. Although India and Russia have discussed the possibility of facilitating trade in local currencies, no formal guidelines have been established.
India's Imports from Russia Have Increased
India's imports from Russia have increased from $10.6 billion to $51.3 billion since Russia's invasion of Ukraine. Discounted oil has made up a significant portion of India's imports, which reached a record 1.68 million barrels a day in April, up six-fold from a year earlier, according to Vortexa Ltd, a data intelligence firm. Meanwhile, India's exports to Russia slightly declined from $3.61 billion to $3.43 billion.
The suspension of the rupee-rouble trade system between India and Russia is being viewed as a blow to Indian importers, who have been importing large amounts of cheap Russian oil since the start of the Ukraine war. Reports indicate that importers were hoping for a permanent rupee-rouble payment mechanism to help lower currency conversion costs.
Boosting Use of National Currencies
Speaking to reporters, Lavrov stated that there is an understanding among SCO member states about "boosting the use of national currencies" in order to avoid the "abuse" of the US dollar. He added that the practices currently being formed in the Eurasian Bank of Reconstruction and Development and the new BRICS Development Bank can be used.
Lavrov praised Brazilian President Luiz Inácio Lula da Silva's call for the BRICS countries to move to national currencies to end dollar dominance. He also said the prospect of creating an "aggregated currency" is being reviewed.
As reported earlier, India and Russia have been increasingly opting to route goods operations through third countries such as the United Arab Emirates (UAE), thereby facilitating transactions in currencies other than rupees, roubles and dollars.