Russia's oil revenues from India stuck abroad as rupees languish in banks
A significant imbalance in trade with India leaves Russia losing up to USD 1 billion in oil revenue every month, Bloomberg reports.
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With imports from India stagnating, Russia is ending up with an excess of rupees, which its companies have trouble repatriating because of local currency restrictions.
Consequently, the rupee assets remain stranded outside Russia, swelling the stockpile of capital it has amassed abroad since the full-scale invasion of Ukraine.
Every quarter, the imbalance will likely generate the equivalent of USD 2 to 3 billion that Russia cannot use, according to Bloomberg.
The situation is so deadlocked that Russia has again started considering investing in the Indian capital market, something Moscow initially did not favour. Another option is to invest rupees in Indian infrastructure projects in exchange for equity stakes.
"There are no alternative oil importers of India’s calibre on the horizon for Russia, so exporters and banks will gradually accept settlement in rupees. This will allow Russia to keep its oil flowing, but will make hard currency more scarce, weaken the ruble and push inflation higher," Alexander Isakov, a Russian economist, was quoted as saying.
India, as well as China, has become the key importer of Russian oil after the Western price cap imposed in response to Russia’s full-scale aggression against Ukraine.
The share of India’s Russian oil imports increased tenfold, from 2 percent in 2021 to 20 percent last year.