Russia and India have taken a significant step to address the currency payment deadlock and bolster their economic ties through a strategic collaboration between the Russian Export Center and the Goa Shipyard Limited (GSL). This partnership aims to leverage the Rupees earned from India’s crude oil purchases to construct 24 cargo ships. The move comes as the delivery of two systems of S-400 surface-to-air missiles has faced delays due to currency-related issues.
Both countries are dealing with sanctions from Western nations but remain committed to maintaining their trade relations. India has already exported a range of goods to Russia, including machinery, chemicals, marine products, and pharmaceuticals, with a total value of $3.14 billion in the fiscal year 2022. In return, India has imported crude oil, petroleum products, precious stones, and vegetable oil, with a total value of $46.21 billion from Russia in the same fiscal year.
The payment stalemate has resulted in over $2 billion in Indian payments being held up for more than a year. In response, Russia suspended credit for the purchase of spare parts and two S-400 air-defense systems worth $10 billion. Initially, both countries had opted to pay for the S-400 systems in Indian Rupees to reduce reliance on the US Dollar. However, complications arose due to the Russia-Ukraine conflict and Moscow’s subsequent financial isolation.
Russian Foreign Minister Sergey Lavrov acknowledged the challenge, noting that they had accumulated billions of rupees without a clear purpose for them. In response, India has proposed reinvesting the rupees in its own economy, offering Russia a long-term investment opportunity.
India’s military connections with Russia are substantial, with a majority of its military platforms originating from Russia. Nonetheless, India has been actively diversifying its defense imports and reducing dependence on Russia. The purchase of S-400 systems in 2018 marked a step in this direction, despite potential sanctions from the US.
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