India and Russia have shared a long-standing relationship, both politically and economically. One of the key aspects of this relationship has been the trade of crude oil between the two countries. For many years, India has been paying for Russian crude in rupees, but recent challenges in rupee-rouble settlements have prompted a gradual shift in this payment method.
India’s reliance on Russian crude oil has been steadily increasing over the years. In fact, Russia is one of the top suppliers of crude oil to India, accounting for nearly 15% of the country’s total imports. This has been a mutually beneficial arrangement, with India being able to secure a steady supply of crude oil and Russia gaining a reliable market for its oil exports.
However, in recent years, there have been challenges in the payment mechanism for this trade. The main issue has been the volatility of the rupee-rouble exchange rate. The rupee has been depreciating against the rouble, making it more expensive for India to pay for Russian crude. This has been a cause of concern for both countries, as it affects the profitability of the trade.
To address this issue, both countries have been exploring alternative payment methods. One of the solutions that have been proposed is to use national currencies instead of the US dollar. This would eliminate the impact of exchange rate fluctuations and make the trade more stable and predictable. In line with this, India has been gradually shifting towards paying for Russian crude in rupees.
This shift has been a positive development for both countries. For India, it means that it can continue to import crude oil from Russia without worrying about the impact of exchange rate fluctuations. This will also help in reducing the country’s dependence on the US dollar, which has been a cause of concern for the Indian government in recent years.
For Russia, the use of national currencies in trade with India is a step towards reducing its dependence on the US dollar as well. This is in line with the country’s efforts to de-dollarize its economy and reduce its vulnerability to US sanctions. It also strengthens the economic ties between India and Russia, further cementing their strategic partnership.
Moreover, this shift in payment method is also a testament to the strong and growing economic relationship between India and Russia. Both countries have been working towards increasing their bilateral trade, with a target of $30 billion by 2025. The use of national currencies in trade is a step towards achieving this goal and will further boost economic cooperation between the two nations.
In addition to the economic benefits, this shift also has geopolitical implications. The use of national currencies in trade between India and Russia is a sign of their growing independence from the US-dominated global financial system. It is a move towards a more multipolar world, where countries are not solely reliant on the US dollar for international trade.
In conclusion, the gradual shift towards paying for Russian crude in rupees is a positive development for both India and Russia. It addresses the challenges in the rupee-rouble settlement and strengthens the economic ties between the two countries. It also has geopolitical implications, signaling a move towards a more multipolar world. With this shift, India and Russia are not only strengthening their economic partnership but also sending a message to the world about their growing independence and cooperation.
