India and Russia plan to increase the share of rupee-rouble payments in bilateral trade which would commensurately reduce the risk of deals getting blocked in a situation where the US decides to unilaterally impose sanctions through a dollar based international banking system.
The issue was discussed at the India-Russia foreign ministers meeting on Tuesday.
“We recognised the need to step up work on the updated intergovernmental agreement on mutual protection of investment and to increase the share of national currencies in mutual settlements,” Russian foreign minister Sergy Lavarov said at a joint press conference with Indian foreign minister S. Jaishankar after the meeting.
India’s foreign secretary Harsh Vardhan Singhla had also said in Moscow recently that the use of national currencies in bilateral trade settlements will reduce cost and time as well as risk of held-up payments.
Shringla said India-Russia trade, amounting to USD 10.11 billion in 2019-2020, is far below the potential. "Last year there was a slump but we are finding ways of reviving it. Both countries have set the bilateral trade target at USD 30 billion by 2025."
India is a large importer of Russian military hardware and there have been instances in the past when US sanctions against Russia have emerged as a hurdle in payments through the international banking system.
Lavrov said it was a known fact that United States has been trying to discourage countries from buying Russian weapons, but U.S. objections did not feature during his talks with Jaishankar, which had focused on deepening military ties.
The latest instance of US opposition has been in the case of India buying much-needed S-400 anti-aircraft missiles from Russia. While the deal was sealed in 2018, the US still has reservations over it.
“We have confirmed our determination towards the development of military-technical cooperation. There is an inter-governmental commission dealing with the subject. The prospects for additional production of Russian military equipment on India’s territory are under discussion,” Lavrov said at the press conference.
Officials from both countries have said their governments have been discussing for some years the possibility of making Russian military helicopters in India.
India has made Russian MiG fighter planes and Sukhoi-30 jets under license and the two countries have collaborated to develop and produce supersonic BrahMos cruise missiles in India.
The rupee-rouble trade had functioned well in the mid-sixties at a time when India was very short of foreign exchange. India had under the arrangement imported military equipment from Russia such as T-72 tanks and MiG fighter jets that had helped in achieving the decisive victory over Pakistan in the 1971 war.
