By K Raveendran

The proposed rupee-rouble trade for oil will be a key ingredient, along with Russian insistence on rouble payments from European gas customers, in Putin’s sanctions-busting programme. The Biden administration has obviously seen the implications of an India-Russia oil deal and it is no surprise, therefore, that Washington is trying to put pressure on New Delhi and yet without pushing things too hard as it is well aware of the limited scope of US pressure in this regard.

Russia has reportedly offered a $35 per barrel discount for its best crude, and that too on prices that prevailed before the Ukraine invasion took place. This means that at prevailing crude prices, Russia is offering oil at about half price, which is an irresistible offer even in normal situations, but given the precarious condition of India’s oil economy at present, it is nothing less than a providential helping hand. On top of that, on offer is for upwards of 15 million barrels. India’s oil major Indian Oil has had a contract for such quantity for a long time, but has barely drew down on it as the deal provides for purchases only when it is economical for the company.

For Putin, a rupee-rouble trade in oil will take some sting out of the US-sponsored sanctions as the Biden administration’s gambit of starving Russian oil of demand through the embargo will fail to deliver the desired results. Russia is a leading player in the international oil market and any plan to banish it from the market would have brought disastrous consequences, which Moscow could not have withstood easily. This is what Putin has checkmated through his currency standoff with the West as well as the rupee-rouble trade with India.

The two together will limit the shock of Russia’s exclusion from the SWIFT, the most critical messaging interface that facilitates global banking transactions. By insisting on rouble payments to Europe for the Russian gas supplies, Putin has thrown the ball in the European court, leaving it to Europe to figure out how to deal with the problem. As things stand, it will be a long time before European nations can manage without Russian gas and Putin knows this as well as any European government. Biden and his allies are well aware of this vulnerability, but have so far fallen short of anything that would address the problem even remotely. The task has been further complicated by the considerations of self-preservation by individual countries.

Moscow plans to circumvent the SWFT embargo though its indigenous ‘System for Transfer of Financial Messages (SPFS), which is used by Russian banks to complete financial transactions. Spearheaded by the Russian central bank, SPFS has been under development since 2014, when the US had threatened to cut Russian access to SWIFT. The adoption of the alternative system has come as a fait accompli. SWIFT has been used by western nations as a trump card against detractors.

Russia has offered that the rupee-rouble trade be transacted through the SPFS platform and the issue is learnt to be among the top agenda of Russian foreign minister Sergei Lavrov and his team, currently in India. The team is believed to include officials of the Russian central bank as well. The Russian party would most probably be its oil major Rosneft while Indian Oil will make the purchases directly. If the deal goes through, oil to India will follow through Russia’s Vladivostok Port in the far east, which will help avoid shipping hurdles from the Baltic Sea in the west and shipments can each India’s east coast refineries in fewer than 20 days.

The Modi government has so far maintained that there has been no deal with Russia for rupee-rouble trade in oil amidst media reports that the two countries are moving towards such an arrangement as it serves the purpose of both sides. The denial, however, need to be looked at only as technical as at the time of making the statement there did not exist any such deal. In fact, Russian gas major Gazprom was reportedly insisting on rouble payments for gas to be bought by GAIL.

But as Indian and Russian delegations thrash out various issues related to an oil deal using rupee-rouble platform, everything appears to be falling in place for a win-win deal between two long-time partners, whose defence partnership lends credence to closer economic and commercial relations between two major players. (IPA Service)

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