By Haider Abbas
The state of Indian Rupee ‘nose diving’ is terms of US Dollar is a daily news. The rupee slide is normal, and there is no general-discussion on any prime news on it, which is also easily understandable, due to huge media stakes inside BJP. But, the hype of ‘foreign-ministers’ meeting of Shanghai Co-operation Organization in Goa, on May 4 and 5, came in for a rude shock, as Russian Foreign Sergie Lavrov took the soil of India to call for the Indian Rupee-drubbing! Nothing could have left India more red-faced, as the stand came from Russia’s most important international face, and that too, inside India. SCO is an eight nation group, having Russia, China, India, Pakistan, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. It has made Iran to be its ninth member.
The Rupee-Rouble trade is now to be suspended as Russia does not find it ‘making much commercial sense’ . The countdown, or the coming events, had surfaced on February 7, according to Russian envoy to India, Denis Alipov, , that mechanism between India-Russia over Rupee-Rouble trade has been established but is not getting possible due to fears from US. A news report in The Telegraph Online suggested , “The mechanism of Rupee-Rouble trade has been established. It is now for the banks to use it. What we see is that many Indian banks are over-cautious… using this mechanism would not invite any secondary restrictions from the US if that is the fear. He was speaking on the occasion of a discussion “Next Steps in India-Russia Strategic Partnership: Old Friends, New Horizons” to mark the 30th anniversary of the 1993 Treaty of India-Russia Friendship.
He had openly expressed that out of Indian banks reluctance to rupee-rouble trade, for the fear to attract US sanctions, there is a considerable stress on bilateral relations between Delhi and Moscow. However, the fears from Russian envoy could not be allayed despite Indian External Affairs Minister S Jaishankar having stated in parliament, a year back, that the ‘government was examining ways to revive the rupee-rouble trade mechanism that was provided for in the Indo-Soviet Trade’ . The envoy had set the stage, for the grand SCO meeting, as he had cautioned India not to get exploited by US over its border dispute with China and ‘the sooner there is normalisation between the two countries the better for the whole world. He also in the same vein did make a deliberate reference that due to concerns from India, Russia strangled its defence cooperation with Pakistan ‘precisely because it would impact our relations with India and that Russia is keen to expand its economic presence in Pakistan.’
The timings of Russian stands comes out as a very precarious situation as Russia is at war with Ukraine, since a year and a quarter, and in-between this period, India has been able to buy Russia oil, at extremely slashed rates, despite US pressures, but now India is to eventually make ‘payment’ for it, which Russia wants to be in Rouble, and does not want it in terms of US dollars. Russia has made it long clear that it wants to De-Dollarise the world-economy. How will India situate to it, particularly when in the year 2022-23, as per The Economic Times 2 on April 4, the India-Russia trade had hit a record 40 billion USD. But, Russia is reluctant to seek payment in Indian rupees. The situation gets more complex as products from India, are not that much in demand in Russia, which is to block the prospects of any vice-versa Indian products landing-up in Russian market and will lead to surplus accumulation of Indian Rupee, because of trade settlement in local currency, in Russia, which is ‘not desirable’.
The Indian Rupee, which has already taken a hit, if dumped by Russia in international market, is what may be the most scary-situation, as Indian rupee then is likely to come crashing down, and therefore, India and Russia are now ‘joining the heads’ to explore third-country currency , and here Russia wants India to buy any third-nation currency to make the payments, which is most likely to be China Yuan. A report published in The Hindu Business Line 3 on April 4, on the same lines referred to this ‘exploration of alternatives’.
Will Russia seek payments in US Dollars, Euros, Japanese Yen or Pound Sterling can be understood in NO, as Russian policy is to make Yuan-Rouble based economy. India buying Chinese Yuan for it, is also a difficult task, particularly when India and China are at loggerheads on many fronts, and India does not want to strengthen Yuan. Hence, the deadlock may arise soon, and this is what will ultimately hamper the Indian rupee! The way-out may be from BRICS, which is a group comprising Brazil, Russia, China, India and South Africa, and there are all prospects that BRICS Currency may shake Dollar supremacy, reported Foreign Policy on April 24. But, BRICS getting-into-shape is still a long way to go as it is only right now at a level of an idea, and moreover, India has also not shown any promptness towards it, as S Jaishankar has already stated that each country have ‘their own’ position on it, came his statement in UNI on April 13. It can also be construed here that India, being a strong ally of US, cannot fathom to be a part of a group engaged to challenge the dominance of world-wide Dollar based economy. There is now almost a counter global currency in terms of Yuan-Rouble to US Dollar, and BRICS proposal is also the part of the same agenda, which US would never like to see as a success.
What is therefore to be a way-out for India? India, might look forward to seek Russia re-investing in India these around 40 billion Dollars and may also try to look for more-exports into Russia particularly its pharmaceuticals, but Russia right now is on a tightrope as the war with Ukraine is still raging, with US and the entire West standing alongside Ukraine. There is a possibility that both nations may eventually resolve it, but that does not seem to be any immediate possibility, and this is what Sergei Lavrov has spelt it out in Goa, telling, that right now the negotiations are stalled. The positive aspect is that Russia, out of its seven decades friendship with India, still does not doubt its trust with India, and this is where New Delhi, will find it feasible. India is also now suppose to find-a-way-out as Russia dumping Indian rupee would be the worst fate India can afford!
However, it is also to mention that Russia supplied its heavily discounted oil to India, yet India did not slash the oil prices inside the country.
The writer is a former UP State Information Commissioner and writes on international politics.