Russia has been hitting back at sanctions imposed by the West after the invasion of Ukraine by demanding that payments for oil, gas and perhaps other essentials are made in roubles. The move has caused the rouble to bounce back after losing half of its value, recovering almost all of the losses it incurred.
Now, Al Jazeera reports, Russia is in talks with India to use an international payments system developed by the Russian central bank.
This would mean payments between the two countries – who both are considered economic powerhouses – would take place using Russia’s messaging system SPFS. The rupee-rouble-denominated payments would avoid using SWIFT – the widely used international -border payment system operator – which is a key consideration for Russia after the U.S., along with the European Union, cut off seven Russian banks from SWIFT after the invasion.
Visa and Mastercard also suspended operations in Russia, and it is believed that the Moscow is now in talks with India to link its Unified Payments Interface with their MIR payments system for seamless use of cards issued by Indian and Russian banks
India is looking to buy oil and weapons amongst other goods from Russia, the report said. Russian Foreign Minister Sergei Lavrov is currently in India for a two-day visit. Russian central bank officials are likely to visit India next week to discuss the details, it was claimed.
India’s government has pushed back against demands for sanctions by arguing that China’s belligerence makes purchasing arms from Russia necessary.
Under the proposal, rubles will be deposited into an Indian bank and converted into rupees and the same system will work in reverse, Al Jazeera reported.
“Prima facie this is a bilateral agreement for payments against goods and services movement between two countries,” said Indranil Pan, chief economist at Yes Bank Ltd. in Mumbai. “Therefore, there shouldn’t be any risk imperative in this deal.”
India is coming under increased pressure from its Western allies however to condemn the invasion of Ukraine and to join in sanctions against Russia.