India’s government is considering a proposal from Russia to use a system developed by the Russian central bank for bilateral payments, according to people with knowledge of the matter, as the Asian nation seeks to buy oil and weapons from the sanctions-hit country.
The plan involves rupee-rouble-denominated payments using Russia’s messaging system SPFS, the people said, asking not to be identified discussing confidential deliberations. No final decision has been taken and the matter will probably be discussed when Russian Foreign Minister Sergei Lavrov arrives in India for a two-day visit on Thursday.
A finance ministry system wasn’t immediately available for a comment.
India is keen to continue bilateral trade because of its dependency on Russian weapons and the prospect of buying cheaper oil as global prices surge. Prime Minister Narendra Modi’s government has been pushing back against pressure from Western nations, including Australia, by arguing that arms purchases from Russia are needed to counter China’s growing military assertiveness.
Under the proposal, roubles will be deposited into an Indian bank and converted into rupees and the same system will work in reverse, one of the people said. Undecided elements include whether the exchange rate will be fixed or floating.
Russia also wants India to link its Unified Payments Interface with their payments system for seamless use of cards issued by Indian and Russian banks after Visa and Mastercard suspended operations, one of the people said.
India’s neutral stance on the Russian invasion of Ukraine has already put a strain on the Quad alliance with the US, Japan and Australia, three nations that have launched a diplomatic effort to convince Modi to take a tougher line on the war.
Australian Prime Minister Scott Morrison two weeks ago announced a series of trade deals with India after an online meeting with Modi, in which Morrison used his opening remarks to discuss the implications and consequences of the Russian invasion “for our own region in the Indo-Pacific and the coercion and issues we face here”.