Russian invasion on Ukraine is putting India in delicate situation globally; as it is unable displease any one. On one side Russia is a crucial partner in defence and security sectors, in which Ukraine is also significant partner, besides growing association developing with USA.
The US commands considerable economic weight and as evident from the past, any sanctions it imposes on Russia will into dilemma on its foreign policy. On one side it cannot desert long-standing and time-tested allay Russia and on the otherhand, it may be difficult to attract new allays like USA and European nations. The US has made it clear that their response to Russian military action would be a ”strong economic and other measures.”have a detrimental effect on the Russian economy. The most significant potential blow would be disconnecting Russia from the international fund transfer messaging service SWIFT, which is feared to be a measure on the table.
The recently held first ever 2+2 meeting between India and Russia featured a discussion between the two sides on the situation around Ukraine, the Indo-Pacific and the Line of Actual Control.
In the wake of the events on the Crimean Peninsula in 2014, the United States imposed sanctions on Russia. The sanctions have had a devastating impact on Russia’s economy and have caused it to seek ways to bypass and minimise the effect on its international dealings.
For Russia, the support of partners such as India and China has been instrumental in weathering the storm. Not least because of the revenues trade with them brings, but also in the special measure they have undertaken to make payments for deals with Russia, in some cases putting them at odds with US policy.
India has continued to transact with Russia in crucial sectors such as defence, outer space and energy supplies, despite the impending threat of US sanctions in some cases like the S-400 deal.
According to an analysis made by India’s premier think-tank The Takshashila Institution, New Delhi, the areas where Ukraine conflict will have greater impact on India are :
Rupee-Rouble
Russia has started settling its arms export transactions with India in Roubles and Indian Rupees, bypassing US dollars and a significant impact of US sanctions. Earlier, there was some talk of using Europe to settle the balances too, though it is unclear if any payments were in fact made in Euros. Another mechanism to settle the balances could be to adjust the payments against any commodity Russia may want to import from India.
Special Bank Branches to Handle Transactions with Russia
Another possible approach to take would be similar to how transactions between Indian refineries and Iranian oil suppliers were handled. It will involve designating special branches of Indian banks which can handle Russia specific transactions.
Using Alternatives to SWIFT
Indian banks and other financial institutions can switch to using other international fund transfer messaging services like INSTEX or Russia’s own SPFS. However, concerns have been raised by Indian Banks themselves stating that merely switching over to another service doesn’t address their own internal issues because of which the banks have been averse to carrying out transactions involving entities listed in the US’s Specially Designated Nationals And Blocked Persons List (SDN).
Introducing Digital Currencies
India and Russia have both made plans to introduce digital currencies, which could facilitate international trade without the use of the US dollar.
