Russia mulls Cold War-era monetary pact amid sanctions
- The Indian and Russian governments are in talks to reinstate a rupee-ruble register for the first time since the Cold War.
- The agreement would allow companies from both countries to do business without using the US dollar, which is the primary international trading currency.
- Meanwhile, India bought 3 million barrels of Russian oil this week at a very favorable price.
As Western sanctions continue to stifle the Russian economy, Moscow could revive a Cold War-era monetary deal with India.
A ruble-ruble deal would allow companies in each country to do business without the need for US dollars – the primary currency for international trade. Moreover, deals reached through this mechanism would minimize the risk of US sanctions, which have largely banned Russia from trading via dollars outside of the energy sector.
Ruble-rupee ledgers would likely be set up at banks in Russia and India that aren’t exposed to the US financial system, sources told Reuters. Washington Post.
Reports of a ruble-ruble deal began to surface after Russia attacked Ukraine last month. And Wednesday, the The Financial Times reported that India’s central bank is involved.
The possibility of a currency deal was highlighted earlier this week, when the the wall street journal reported that India – the world’s third largest oil importer – has agreed to buy 3 million barrels of Russian crude at a huge discount.
The purchase went through traditional financial channels and the White House said it violated no sanctions. But Western governments are taking a tougher line on Russia’s energy sector, and global traders are shunning Russian crude because it’s “self-sanctioning”.
So a ruble-ruble pact could reduce India’s risk of potentially tighter limits on Russian oil while ensuring the South Asian powerhouse retains access to arms deals with Moscow, according to reports.
Efforts to bypass the U.S. dollar come as Saudi Arabia explored an oil deal with China done in yuan, the Journal said, in a move that would break 50 years of precedent for Saudis trading oil in dollars.
Even before Russia’s invasion of Ukraine triggered a wave of sanctions, Russia and China sought ways to “de-dollarize” and establish alternative financial systems.