About $40 billion is stuck in Russian currency accounts they can't spend. Financial dead end.

When the West began to cut Russia off from bills in dollars and euros, The Kremlin has repeatedly said that you can do without bad Western money. Our devotees of de-dollarization and BRICS have even predicted the fall of the dollar. However, the full transition to national currency settlements with “friendly” countries has indeed proved to be a neck-to-head task. While in China-Russia relations it is inactive possible to increase operations in yuan, in India, which became the largest consumer of Russian oil, the process was yet stuck in a dead end and put the Kremlin in large trouble.

Russia has accumulated billions of rupees in Indian bank accounts that it cannot use," said abroad Minister Sergei Lavrow on Friday (his words at a gathering of the Shanghai Cooperation Organization in the Indian state of Goa quotes Bloomberg) "This is simply a problem," said Lavrow. We gotta usage that money. But to do so, these rupees must be converted into another currency, and this is now under discussion."

As a way of explaining how a brief introduction works. Imagine buying an oil ship from Russia, paying a fewer million rupees. You hand them over to the Russians and now they have your currency in their accounts. In the store close Moscow they will not print it – they must buy something in India and only India. If you're gonna buy, say, 300 tons of rice, or a fewer good dresses, that's okay. But if you're sending hundreds of these tankers? There's a mountain of currency increasing in your safe that is worthless at the moment. due to the fact that what kind of money is that if you can't spend it?

Reuters reported, citing Indian officials and a individual acquainted with the negotiations, that Russia and India had resigned their attempts to transition to rupee in bilateral trade. There was a stalemate due to the fact that if the situation continued, the Russian vault would swell from rupees. “We don’t want to do bills in rupees anymore, this mechanics just doesn’t work. India tried to do everything possible to make it work, but nothing worked."

The problem is the gigantic trade imbalance between the 2 countries. According to the Indian Ministry of Trade and Industry, exports to Russia decreased by 11.6% to US$2.8 billion in the last 11 months ending in March, while imports increased almost 5 times to US$41.56 billion. Global sanctions origin India to send almost 12% little products a year alternatively of expanding the shipment of goods. In turn, the Russians send oil for $41 billion. It is easy to announcement this slight imbalance of $41 billion > $2.8 billion. If we are dealing with a currency specified as a dollar or a euro, we can sale something for the Euro to Germany for something else in France or Greece. We will besides be able to pay the Euro outside our continent. With the rupee and its course fluctuations, we're going down a dead end.

Therefore, Moscow believes that after the settlement in Russia's national currencies there will be around $40 billion in rupees, and the accumulation of specified an amount in Indian currency is “not desirable”, said the agency Reuters typical of the Indian government. Trade imbalance means that "the amount of frozen funds" can scope tens of billions of dollars," quoted Bloomberg Alexander Knobel, manager of the Institute of global Economics and Finance. A trade deficit is being created which limits the ability to account with 3rd countries. The failure to usage rupees and to convert them to a more convenient currency already poses serious problems. While Putin needs money for war, and income is falling, the parties have been struggling for a year to transfer more than $2 billion from India to Russia to buy weapons. Do you realize that paradox? Countries among themselves have a trade balance of billions of dollars in rubles and rupees. But the arms contract was in dollars. And now both countries (or members of BRICS) have been incapable to figure out how to transfer $2 billion for almost a year. Dollars at this point are useless due to the fact that Delhi is afraid of American capital sanctions. He is besides afraid of rubles – due to the fact that you can't buy them in specified quantities after an acceptable course. And the rouble course could break at any moment. In turn Moscow has nothing to do with another rupees, too the variation in rupee course besides leaves much to be desired.

For India, Russian oil has become a very crucial import commodity. According to Vortex, deliveries reached evidence 1.68 million barrels a day in April 2023, and this is six times more than a year earlier. Before the war India almost never bought oil from Russia. On the another hand, the situation is disastrous. There is no increase in transportation to Russia (for example, to pay rupees) – mostly due to the same calculation problems and large losses on exchange rate differences. Exports from India to Russia in March 2023 amounted to $300 million, and to the African country of Togo – $400 million. To realise the scale of the problem, I will mention that Togo has little than 8 million people and is 284 times the size of the country than Russia. But it's not over yet...

Because the communicative just went round. Alexander Isakov, a Russian economist, besides recalls that the rupee problem has long-standing roots: "VEB continues to organise auctions to sale the remainder of Indian rupee debt to the russian Union" Russia, or, in fact, the USSR has already experienced akin problems with rupee liquidation, inherited this problem Russia – it has not solved it for almost 33 years, and now it is repackaging in the same railroads.

"Our exporters find it hard to exchange rupees," said the president of the Bank of Russia Elwira Nabiullin. - Best if they were invested in India's financial instruments. In the close future, specified instruments are improbable to appear on the Russian market, as India does not want to endanger the West and its sanctions. What's the point? If Russia is just a gas station? It's a shame to get tired of it.

In conclusion, we have a very good example of the liquidity of Russia's finances. Billions are frequently spoken of in abroad exchange reserves. So here's $40 billion in rupees. It's like boxes of gold in the desert. We are besides incredibly rich, and we die of thirst at the same time. There are many specified “activities”. another countries' bonds, controlling packages of the largest Russian companies, gold and another precious metals. Everything has any value. So we have this gold in the box. But we're being driven out into the desert. The markets are closed. Russian companies are not sold. The gold released in large quantities results in a sharp drop in prices on the markets. And the war is on and Putin needs liquidity. And that's the biggest problem right now.