India is still paying Russia in dollars for oil imports

Thedollarremains the mainstay of payment forRussian oil, asIndiaisn’t inclined to switch to the euro or the United Arab Emirates’ dirham, Moscow’s preferred alternatives to the greenback, according to multiple executives and officials.Russiais reluctant to shift to the rupee due to the burgeoning trade imbalance between the two countries, they said.

Indian refiners continue to pay in dollars using regular banking channels for the oil they buy from Russia, executives and officials said, adding that the alternative rupee payment mechanism devised by the Reserve Bank of India (RBI) hasn’t gained traction.

Lenders, Suppliers Not Keen “Neither banks nor suppliers are too keen on the rupee payment. Since our exports to Russia are too little compared to our imports, suppliers will be left with too many rupees at hand and they aren’t sure what they would do with that,” said an industry executive.

In July, RBI laid down the rules for international trade settlement in rupees.

Rising oil imports from Russia have widened the trade imbalance. Indian lenders too have been cold to the idea of rupee settlement as they are of the view that it may trigger increased US scrutiny, the executive said.

FinMin’s Call: Industry

Russia had previously asked Indian refiners to pay in euros or dirhams. “If we must replace the dollar, it should be the rupee. Why should we strengthen the euro or dirham?” said an official. The choice of currency is something only the government can decide on, industry executives said. “The finance ministry has to take a call on which currency would best serve the national interest,” said one of them.

Any transaction in dollars can be blocked by the US, but even the dirham is not considered safe by some industry executives, who feel Washington will find ways to do the same with the UAE currency transactions.