With Russia feeling the pressure of growing global isolation as the West notches up support to Ukraine, Moscow is busy persuading India to merge more firmly with the country’s economy, sources said. India, however, is intent on treading the middle path.

Russian President Vladimir Putin’s aide, Igor Levitin, has been in the capital and held meetings last week with Indian industry and officials. These discussions centered around ways to ease logistical and payment problems arising due to growing sanctions from the West and greater financial integration, a source tracking the matter told businessline.

But India, which has been successfully defending its increased purchase of discounted crude from Russia, is unlikely to take steps that could showcase it as a supporter of Russia in the war, the source added.

Currency trading

“Russia is hopeful that India would be open to allowing trading in the rupee at the Moscow Exchange and also agree to integrate with Russia’s parallel financial messaging system (SPFS), developed as an alternative to SWIFT, but New Delhi is not keen,” the source said.

Russia has become India’s fourth largest import source in April-December 2022, with total goods imports during the period, driven mostly by crude, rising 400 per cent (year-on-year) to $32.88 billion. India and Russia are trying to put in place a rupee payment mechanism to carry out trade in local currencies, but the system hasn’t taken off yet.

The Chinese yuan has been doing exceptionally well at the Moscow Exchange, and so it may not be a good idea for India to take up the offer. “As neither the rouble nor the rupee are fully convertible, trading in the Indian rupee at the Moscow Exchange will be difficult. Also diplomatically, the move could be harmful for India,” the source said.

Taking sides

Similarly, while Iran and China, which are openly siding with Russia, are ready to integrate with SPFS to nullify the effect of several Russian banks being banned from using the SWIFT messaging system (as part of EU’s sanctions), New Delhi would not want to do so.

“We can’t be seen cosying up to Russia beyond a point,” said Delhi-based trade expert Biswajit Dhar. He said while India has been able to legitimise its purchase of discounted oil from Russia by playing its diplomatic cards well, it would not want to be seen as taking sides.

Russian businesses also want direct conversion of rupee to rouble in bilateral trade without cross currency conversion.

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