Recently, India and Russia have been at odds over settlements, which has prevented Russian tankers originally scheduled to be shipped to India from making deliveries, and some have even turned to China. Behind this incident, there are considerations between the two parties in terms of settlement methods, currency selection, and costs.
First of all, the Indian side accused the ** company in the Russian Far East of not opening a bank account in the UAE as agreed, making it impossible for Indian buyers to make payments in UAE currency. This means that India is unable to settle as planned, resulting in transactions that cannot go smoothly. However, the Russian side had already informed the Indian side in advance when it was trading oil with India that other currencies would not be accepted except for the yuan. Russia's choice of settlement method highlights its delicate consideration of economic benefits and costs.
Secondly, the Russian side is reluctant to accept India's settlement plan, mainly because the rupee and UAE dirhams are less liquid and recognized, and are not as widely accepted in the international market as the US dollar and yuan. This will increase the transaction costs and complexity for Russian businesses, as well as involve exchange rate risks that may be faced during the currency exchange process, leading to potential economic losses. In contrast, the acceptance of RMB settlements mitigates risks and is in line with China's facilitation as Russia's main partner.
In addition, India's tentative use of the UAE currency is essentially to promote its own rupee and try to elevate its rupee's status in the international community. However, India's position in the international settlement system is still not strong enough and the rupee has not become one of the major currencies. Therefore, the Russian side does not agree with this and is not willing to risk accepting India's settlement plan.
Based on the above analysis, the differences between Russia and India on the settlement issue are closely related to their careful trade-offs of benefits and risks. The fact that the Russian side has chosen an uncompromising approach and has turned to the Chinese market shows that the Russian side believes that such an option is more beneficial to it. India, on the other hand, needs to see clearly the arduous nature of the process of internationalization of the rupee, and cannot lead to cracks in bilateral relations just for the sake of immediate interests.
The ** between Russia and India has always been very important, especially in the field of oil. However, due to differences over settlement issues, the Russian-Indian bilateral ** has been greatly affected. India's oil imports from Russia reached an all-time high in May last year, but have since slipped until December to their lowest level in a year, the data showed.
If the two sides cannot reach an agreement on the settlement issue, Russia and India will continue to be delayed and attacked. India needs to realize that the internationalization of the rupee has a long way to go at this stage, and too much rush for quick success may lead to the rupture of the entire relationship.
However, even if Russia turns to the Chinese market, it is not entirely motivated by the best interests of interest. International is a well-calculated game, and every transaction involves the trade-off between interests and costs between countries. Russia is reluctant to compromise on India's settlement scheme and the Indian rupee because it is more risky for Russia, while accepting RMB settlement will reduce costs and make cooperation with China smoother.
In the international **, the choice of settlement method is the right of each country to be independent. Each country will make the right decisions based on its own interests, risks and costs. It is in Russia's own interest to choose not to compromise, to turn to the Chinese market and accept the renminbi settlement.
Going forward, India should be more cautious in its settlement issues, respecting each other's choices while ensuring its own interests, and working with partners to find solutions. At the same time, India should ponder the arduousness of the internationalization process of the rupee and not rush to sell the rupee so as not to lead to a rupture in bilateral relations. The two sides should promote the further development of the partnership through dialogue and cooperation on an equal footing to achieve a win-win situation.