NEW DELHI: The Reserve Bank of India’s notification, issued on July 11 to inter alia facilitate payments to Russia for oil, defence spares, ammunition and associated equipment imports, has failed to break the payment deadlock between the two countries.
The RBI had, through its notification, authorised Indian banks to open Vostro accounts in a foreign partner bank where payments for imports could be made in rupees.
Logically, payments to Russia, pending since its invasion of Ukraine, should have started flowing into these accounts. Sources, however, said that no payment has yet been made.
According to sources, the sticking point now is the rupee-rouble exchange rate. India has reportedly offered to clear the pending payments at the pre-Russia-Ukraine war rate of about 78 roubles to a dollar. Russia, however, is insisting on payment at the current rate of about 55.
The Russian side has reportedly asked the Indian interlocutors not to squeeze them from all sides. They argued that crude oil is being supplied to India at a hugely discounted price since the war broke. Any further cut would make the deal unviable for them. It is arguing for payment based on the current exchange rate.
India, on the other hand, has pointed out that it has risked global sanctions to continue trade with Russia. India has drawn a lot of criticism from the United States and European countries for buying Russian oil even as the rest of the world imposed sanctions against it for the invasion of Ukraine.
Even as the tussle over the exchange rate continues between the two countries, the quantum of payments due to Russia is accumulating.
Besides oil, India imports over 6,000 defence spares from Russia. Sources said there is a pending payment of about US$2 billion on account of defence imports from Russia.
Russia is also reportedly uncomfortable taking the entire pending payment in Indian rupees. In terms of value, Russia exports almost twice of what it imports from India.
Pressure is mounting on both sides to find a middle ground.
Dirham route?
Russia has asked India to make part of the payment in UAE’s Dirham. India has so far not consented. Russia had earlier asked India to consider payment in Chinese Yuan, but India rejected