India is considering how to circumvent the possible SWIFT blockade of Russia (but the US should do more …)
India is considering establishing a rupee payment mechanism for trade with Russia to cushion the damage to New Delhi from Western sanctions imposed on Russia following the invasion of Ukraine, government and government sources said. banks.
Indian officials fear that vital supplies of fertilizers from Russia could be cut off as sanctions escalate that could affect the international SWIFT payment system, threatening India's vast agricultural sector, extremely important to the subcontinent's economic and social stability.
India has called for an end to violence in Ukraine, but has refrained from openly condemning Russia, with which it has long-standing political and security ties. On Thursday, Russia invaded Ukraine by land, air and sea in the largest attack on a European state since World War II, prompting tens of thousands of people to flee their homes.
Officials said the plan was to get Russian banks and companies to open accounts with some state-owned banks in India for trade deals, a banking source involved in the discussions said. this would transform these banks into "clearing houses" for mutual source accounts.
"This is a proactive move assuming the conflict escalates and there may be a number of sanctions in place," the source said. "In this case we would not be able to settle the transaction in dollars and therefore an agreement has been proposed to open a rupee account, which is being studied."
The funds in those accounts act as a guarantee of payment for trade exchanged between two countries, while the parties trade the goods with each other to make up for the sum, the source said. A similar deal, in which part of the deal with Russia is in foreign currency and the rest is via local rupee accounts, has also been explored, the banking and government source said.
India used a similar tool to trade with oil supplier Iran when it was banned from SWIFT, exactly as it is threatened to happen to India, and it has worked well for several years.
The program was introduced in 2012 and has been running well for several years.
Discussions on Russia were still at an early stage and formal talks had not yet started between the two sides, an Indian government official said.
Russia and Belarus usually account for nearly a third of India's total potash imports. It would not be possible to replace them in the midst of a rise in fertilizer prices to a record high, a senior industry official told Reuters.
New Delhi will also hold a meeting with fertilizer industry officials on Friday to explore ways to secure supplies from Russia and Belarus, said a senior fertilizer industry official, who declined to be identified. In reality, if desired, the USA could intervene directly in this field: the USA is, on a world level, a greater producer of potash fertilizers than Russia. They should increase their production and direct it to India, displacing Moscow's production, even if only for a limited period of time. Who knows if Biden will come to understand this before his SWIFT toy is finally destroyed.
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