During talks at the East Asia Summit, Russian Foreign Minister Sergei Lavrov and Indian Foreign Minister Subrahmanyam Jaishankar addressed a practical and increasingly urgent issue: the accumulation of rupees in Russian exporters’ accounts held in Indian banks and the broader mechanics of settling trade using their national currencies. The discussion reflected a shared interest in streamlining cross-border payments and reducing friction in bilateral commerce.
In remarks made on May 5, 2023, Lavrov outlined that Moscow and New Delhi are examining mutual settlements in rupees with an eye toward how these funds could be converted into other currencies when necessary. The core concern, he noted, is the large volume of Indian rupees sitting in Indian banking channels tied to Russian exports, which raises questions about liquidity, convertibility, and the speed of transactional flows. The aim is to ensure that these rupees become actively utilized in trade rather than merely accumulating in accounts.
Earlier reporting from Indian media, including the New Indian Express based on government sources, indicated that negotiations on rupee-based trade arrangements between India and Russia had not been suspended. Both sides acknowledged numerous issues that required further discussion, with the eventual goal of creating a smoother framework for bilateral settlements in the Indian currency. This approach aligns with India’s broader policy to promote trade and export activity within the context of its foreign trade strategy.
India had given policy authorization to incorporate the national currency into international trade agreements as of November of the previous year. The rationale behind this step was to bolster exports and deepen financial ties with partner economies under the country’s foreign trade policy. By enabling rupees to serve as a settlement instrument, New Delhi signaled a willingness to explore currency diversification in the region and to reduce exposure to external exchange-rate shocks. Nevertheless, reports from May 4 indicated that Moscow and New Delhi had not yet reached a concrete bilateral agreement on rupee-based settlements, signaling continued negotiation on technical, regulatory, and operational aspects.
Former Russian Finance Minister Mikhail Zadornov commented that the ruble’s weakness in international markets has been influenced, in part, by the unresolved status of rupee settlements. Zadornov suggested that the friction in cross-border rupee flows could have a dampening effect on the ruble, as interlinked demand for both currencies evolves in parallel with policy decisions and market perceptions. Analysts observed that such dynamics could introduce new risks to currency stability and capital movements, underscoring the importance of transparent, reliable settlement mechanisms to support mutual trade between the two nations.
Observers note that currency-based trade arrangements are part of a larger trend toward multipolar payment systems where countries seek greater sovereignty over their financial channels. For India, the potential benefits include enhanced parity in trade balances, improved export competitiveness, and a strategic asset in diversifying away from a heavy reliance on any single reserve currency. For Russia, it presents an opportunity to deepen economic ties with a large and dynamic partner and to reduce exposure to Western financial restrictions that can affect cross-border transactions. The dialogue at the East Asia Summit highlighted both the opportunities and the practical challenges involved, such as exchange-rate risk management, banking compliance, regulatory alignment, and the mechanics of converting rupees into other currencies when needed. The discussions are expected to continue with a focus on creating a reliable, scalable framework that supports ongoing commercial activity while maintaining financial stability for both economies, as reported by various sources following the event (attribution to ongoing reporting from multiple outlets).