Oil In Exchange For Candy Wrappers: Russia Has New Problem Over Supplies To India

Kremlin companies have a new headache.

Having increased trade with India by hundreds of percent and abandoned the dollar at the request of the Kremlin, Russian companies are facing a problem: it turned out they have nowhere to put the rupees received for the sale of goods to Indian counterparties.

"Oil in exchange for "candy wrappers". Russian companies do not know what to do with the rupees received from India," notes the Russian economic publication Finanz.

Exporters have accumulated Indian currency, but the Indian regulator does not allow it to be traded on the Moscow Exchange and converted into rubles, Kirill Pestov, managing director for business development of the exchange, said in an interview with Reuters.

"Indian currency regulation restricts the circulation and settlements in rupees outside of India, and this applies to the entire outside world," Pestov explained.

The Moscow Exchange, he said, is waiting for the decisions of the Central Bank of India to expand the internationalization of the rupee. But it is still slow.

Using rupees directly for imports has also proved difficult: trade with India is going in one direction. Deliveries of Indian goods to Russia are stalling, and as a result, a gigantic trade imbalance is forming.

Despite the fact that India imports goods worth $4-5 billion a month, its exports to Russia amount to hundreds of millions, Deutsche Bank analysts say, and in January-September last year, deliveries even decreased by 14%.

As a result, Russian banks have begun to refuse to receive rupees, sources in New Delhi told Bloomberg: they do not want the accumulation of excess Indian currency, which they have nowhere to put. Because of this, the mechanism of trade in national currencies is stalling, sources emphasize: although the Indian Central Bank approved the opening of correspondent accounts in rupees for Russian banks back in June, no major transactions are being carried out.