India is finalizing an alternative payment system that will allow it to continue trading with Russia, which has been subjected to a barrage of Western sanctions since its invasion of Ukraine, an Indian newspaper reported on March 13.
The official said that talks are on with representatives of the Reserve Bank of India, the State Bank of India, and Kolkata-based UCO Bank regarding the payment mechanism.
India used the same mechanism to import Iranian oil after the United States imposed sanctions against Iran in 2012 for its nuclear weapons program. At that time, UCO Bank was appointed and anchored a “Vostro account” from an Iranian bank.
The government also has established a top inter-ministerial panel, led by Economic Affairs Secretary Ajay Seth, to analyze the effects of the Western sanctions against Russia on India’s economy.
The official, who spoke on condition of anonymity, said India would prioritize imports of edible oil and fertilizers because a shortage of any of those goods could lead to food inflation and affect the country’s agriculture sector.
Discussions with banks concluded that India has a better chance of negotiating the rates of its share of Russian oil, given Russia’s dwindling oil market as a result of Western sanctions, the official said.
India has called for an end to violence in Ukraine, while refraining from outright condemnation of Russia, with which it has long-standing political and security ties.
Ely Ratner, U.S. assistant secretary of defense for Indo-Pacific Security Affairs, said during a congressional hearing on March 10 that India is “diversifying their arms purchases away from Russia” and is “moving in the right direction.”
“That’s going to take some time, but they are clearly committed to doing that, including increasing the indigenization of their own defense industry,” Ratner said. “That’s something we should support.”
U.S. Rep. Ro Khanna (D-Calif.) said the United States would be a greater ally to India because the U.S. supported India during its 1962 conflict with China.
“I think it’s obvious that the U.S. would stand against Chinese aggression on the Line of Actual Control far more than Russia or Putin would, and that we really need to press India to not be as dependent on Russian defense and to be willing to condemn Putin’s aggression in Ukraine, just like we would condemn Chinese aggression beyond the Line of Actual Control,” he said.
Russia’s 2021 exports to India were $6.9 billion, mainly mineral oils, fertilizers, and rough diamonds, while India exported $3.33 billion worth of goods to Russia in 2021, mainly pharmaceutical products, tea, and coffee.
