India explores payment options for trade with Russia

Foreign banks that don’t have operations in countries that have imposed sanctions on Russia or routing payments through Russian banks unaffected by the curbs are among the options under consideration. Third-country banks were used to settle trade with Iran.

Two major Russian banks, Sberbank and Gazprombank, are currently exempted from sanctions because they are the main channels of payment for EU’s gas and oil imports from Russia.

“We are looking into this. Even if these banks face sanctions from the US, payments can be made in euros as these transactions are still being carried out until further sanctions,” said a government official, adding that the full impact of the restrictions is yet to be felt.

Efforts to Ringfence Economy

Another option under consideration is the mechanism used to repay Russian debt through a rupee auction held by the Russian central bank. The repayment is made through the export of identified commodities and services.

Bilateral trade between India and Russia is about $10 billion, 1.3% of India’s total trade.

The Reserve Bank of India and the government are in constant touch over developments as they look to contain the fallout and ringfence the economy, said another person with knowledge of the matter. Any decision on the issue will be taken at the topmost political levels in consultation with the external affairs ministry.

India does not want to take any hurried measures that are seen to be undermining western economic sanctions on Russia, sources said.