Billions of profits from Russian oil sales, with Russia being recognized as India’s top oil supplier, are currently held in Indian banks.
Challenges in India-Russia Oil Trade Emerge as Russia, India’s Top Oil Supplier, Seeks Dollar Transition
According to The Herald published article, billions of Russian oil sale profits, earned as India’s top oil supplier, are stuck in the Indian banks, posing a significant setback to President Vladimir Putin’s ambitions to reduce reliance on the U.S. dollar in international trade. The global norm for commodity trade, including oil, gold, and wheat, involves using U.S. dollars, the world’s primary reserve currency.
However, the India’s top oil supplier, Russia, financial system became isolated due to Western sanctions imposed following Putin’s invasion of Ukraine. This isolation severely limits Russia’s ability to conduct transactions in U.S. dollars, effectively constraining its trade options. In response, Putin attempted to circumvent this restriction by selling oil to countries like China and India, accepting their local currencies, the yuan and rupee, respectively. Nonetheless, this maneuver raised concerns about its potential to weaken the global standing of the U.S. dollar.
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Stuck Rupee Assets: Russia’s Challenge in India’s Top Oil Supplier Relationship
Newsweek stated that Russia, recognized as India’s top oil supplier,has emerged as one of India’s leading oil suppliers, amassing billions of dollars in sales. Consequently, a significant accumulation of up to $1 billion per month in rupee assets has occurred within Indian banks. Unfortunately, these assets, earned as India’s top oil supplier, remain inaccessible due to restrictions imposed by the Reserve Bank of India. These restrictions prohibit India’s top oil supplier, Russian companies, from transferring rupees stored in Indian bank accounts back to Russia and converting them into rubles.
The impact of these restrictions is substantial, potentially locking as much as $39 billion in Indian bank accounts. Russia’s Foreign Minister Sergei Lavrov, acknowledged the urgency of addressing this issue, stating that they need to use this money. But these rupees, earned as India’s top oil supplier,must be transferred in another currency, and this is being discussed now.