India-Russia negotiations to procure oil under Rupee-Ruble mechanism underway: Sources

Amid the ongoing war between Russia and Ukraine, the sources from the Finance Ministry of India say that the Indian government will hold discussions with the Kremlin on utilising the Rupee and Ruble mechanism as New Delhi looks to procure cheap oil from Russia. The aforementioned discussion will be important as it will be deciding factor as the government looks to increase oil imports from Russia. It is to be noted that there is also an ongoing negotiation between the Indian and the Russian governments over cheap oil imports. 

It is pertinent to mention here that India is one of the biggest buyers of Russian oil especially after the Kremlin started a war against Ukraine, which forced the western nations to impose a ban on oil imports from Russia. Time and again, Indian officials have made it clear that New Delhi will look after its interest and continue to buy oil from Russia if offered at the right price. A few weeks ago, India's Petroleum Minister Hardeep Singh Puri added, "We’ve energy relations with Russia, we buy crude from them but our total imports are not more than 0.2 per cent, we’re open to buying if terms are right, we’ve to look after our interests.”

Rupee-Ruble mechanism

Putin's regime was cut off from key international currency markets at the start of the Russia-led war on Ukraine, owing to ongoing sanctions that isolated Moscow. As a result, payment mechanisms in local currencies have emerged as a feasible option for increasing bilateral trade.

The Rupee-Ruble system was actively studied by the Indian government as a contingency plan for conducting business with its important partner. The specialised payment mechanism would allow India to carry out existing commercial agreements with Russia while avoiding the severe charges imposed by the West and trading in US dollars.

The Reserve Bank of India (RBI) allegedly met with executives from three Russian financial institutions, including VTB, Sberbank, and Gazprombank, in March to discuss the prospective Rupee-Ruble agreement, indicating significant progress.

The Rupee-Ruble arrangement was first conceived in 1953 under the Indo-Soviet accord as an alternative to collecting dues and making payments in Dollars or Euros.

Image: AP, PIB