New Delhi: As India seeks to buy crude oil and weapons from Russia, the central government is mulling a proposal from Moscow to use a system developed by the central bank of Russia for bilateral payments, quoting sources, news agency Bloomberg has reported.
According to the sources, the move involves rupee-rouble-denominated payments using Russia’s messaging system SPFS.
However, no final decision on this has been arrived yet and the matter will probably be discussed when Russian Foreign Minister Sergei Lavrov arrives in India for a two-day visit on Thursday.
The US and the other European nations have slapped sanctions on Russia for its invasion in Ukraine.
India is keen to continue bilateral trade with Moscow due to its dependency on Russian weapons and the prospect of buying cheaper oil as global prices soar.
The Centre has been pushing back against pressure from Western nations by arguing that arms purchases from Russia are needed to counter China’s growing military assertiveness in the region.
How the system works?
Under the proposal, Russian roubles will be deposited into an Indian bank and converted into rupees. The same system will also work in reverse. However, some elements, including whether the exchange rate will be fixed or floating, are still undecided.
According to the report, Russia also wants India's support.
Moscow is keen to link its Unified Payments Interface with their MIR payments system for seamless use of cards issued by Indian and Russian banks after Visa and Mastercard suspended operations with Moscow.
The US, along with the European Union, severed ties with seven Russian banks from SWIFT, the Belgium-based cross-border payments system operator, including state-controlled VTB, Bank Rossiya, and Bank Otkritie.
What Is SWIFT?
SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunications, is a global provider of secure financial messaging services. It is a member-owned cooperative that provides safe and secure financial transactions for its members.
SWIFT was launched in 1973 to find a better way for the global financial community to move value — a reliable, safe and secure approach that the community can trust, completely, according to its official website.
It is a vast messaging network used by banks and other financial institutions to quickly, accurately, and securely send and receive information, such as money transfer instructions. The global cooperative had become the principal mechanism for financing international trade.
After the harsh sanctions, Russia has been looking for alternative mechanisms to continue its trade.
India has not outright condemned Moscow’s attack on Ukraine, saying only the two neighbours should end hostilities and seek a diplomatic solution through dialogue.
However, India is under pressure from fellow QUAD members that includes the US, Australia, and Japan to take a stronger stand against Russia as the US and its allies try to isolate Moscow from the rest of the world.