SWIFT Sanctions: India seeks alternative for trade with Russia

RIO DE JANEIRO, BRAZIL – The two Asian superpowers, China and India, do not give a damn about the West’s staging against Russia. India, in particular, makes no secret of this.

India has no great interest in hindering trade with Russia through sanctions. On the contrary, New Delhi is looking for ways to remain in business with Moscow. It is a matter of national interest.

While China is still trying not to alienate the U.S. completely while effectively siding with Putin in Ukraine, Asia’s other superpower, India, has no qualms.

According to Nikkei Asia, India is looking at ways to set up a rupee payment mechanism for trade with Russia. The idea is to continue to have appropriate ways to pay for imported goods and also export goods in the event of Russia’s SWIFT exclusion.

It should not be forgotten here that India was non-aligned even during the Cold War and New Delhi always sought to get along with both sides – the Soviets and the Americans.

Indian officials, putting their national interest first, are concerned that vital fertilizer supplies from Russia could be disrupted by tightening sanctions, posing a threat to India’s vast agricultural sector.

Russia and Belarus typically account for nearly one-third of India’s total potash imports. According to a senior industry official, with fertilizer prices at a record high, it would not be feasible to replace them.

Officials said the plan was to get Russian banks and companies to open accounts at some state-owned banks in India to handle the trade, a banking source involved in the talks said.

“This is a proactive move on the assumption that the conflict could escalate and a series of sanctions could be imposed,” the Nikkei source said. “In that case, we would not be able to settle the transaction in dollars, so an agreement to set up a rupee account has been proposed and considered.”

The funds in such accounts serve as a payment guarantee for trade between two countries while the parties exchange goods to balance the amount, the source said.

A similar arrangement in which part of the settlement with Russia is made in foreign currency and the rest through local rupee accounts is also under consideration, the banking and government source said.

Countries often use such mechanisms to protect themselves from the effects of sanctions. The source said that India also used them with Iran after it was hit by Western sanctions over its nuclear weapons program.

The program was introduced in 2012 and worked well for several years. Talks on Russia are still early, and formal negotiations between the two sides have not yet begun, an Indian government official said.

EU leaders agreed Thursday to impose new economic sanctions on Russia. In doing so, they join the U.S. and Britain in trying to punish Russian President Vladimir Putin and his allies for attacking Ukraine.

The sanctions impede Russia’s ability to do business in major currencies and target individual banks and state-owned companies.

A further financial blockade of Russia in the form of a SWIFT exclusion is now planned after initial hesitation.

Russian exports to India in 2021 totaled US$6.9 billion, mainly mineral oils, fertilizers, and rough diamonds, while India exported US$3.3 billion worth of goods to Russia in 2021, especially pharmaceuticals, tea, and coffee. New Delhi is also meeting with fertilizer industry officials on Friday to explore ways to secure supplies from Russia and Belarus, said a senior fertilizer industry official, who did not want to be named.

Similar to China, India has called for an end to violence in Ukraine but refrained from directly condemning Russia, with which it has long had political and security ties.