Once dismissive of India, now it has to look up. Russia was weakened by the war and lost the initiative in its dealings with India. Why did India insist on using the rupee, and why did Russia accept it?
This passive use of the rupee has made it seem as if Russia is at the mercy of India in order to maintain a wartime economy. Looking back on the exchanges between Russia and India, it is embarrassing and emotional.
According to the statistics of the Indian Engineering Export Promotion Council, from April to December 2023, India exported a variety of materials involving electrical equipment, auto parts, machinery and other materials to Russia, with a value of more than $1 billion. India has further raised its export forecast to Russia, which is expected to be worth $1.5 billion by the end of March 2024.
India is more concerned about the quality of the dealings between the two countries. India's Engineering Export Promotion Council said it was happy to accept the Russian payment in rupees. The rupee is the official currency of India, and for India, Russia's acceptance of the rupee indirectly recognizes India's status as a great power, at least in the eyes of Indian elites.
It's not that simple. India's imports and exports account for only about 2% of the world's import and export output, and its industrial strength is not enough to support the widespread use of the rupee in the international market. To this end, India has taken measures that explicitly require the use of rupees for transactions, forcing Russia to accept. India is trying to force Russia to accept its unreasonable demands through influence.
Modi may think that he is a sweetheart, so he chooses between Russia and the United States who gives more chips, and favors whomever he wants. In order to avoid offending India, Russia may have to bow in, even though it knows that the rupee is almost unusable internationally. This may explain Putin's insistence on accepting the rupee, knowing that it is not worth much.
India may really be on the rise, to the point where Russia has to look up. Russia was once arrogant, but now it is weakened in a war of attrition and has become the object of "trampling underfoot" by India. In Russian-Indian exchanges, India has gained the absolute initiative. A few observations: Russia is not providing enough chips, and India needs more benefits.
India has advised Russia to invest in its industry to absorb the rupee while increasing jobs, but India is not an ideal place for large-scale investment. By forcing Russia to accept the rupee, India is actually trying to force Russia into submission through pressure. India may really "rise", and Russia has lost something in the process. Russian-Indian relations are undergoing a major adjustment, with India dominating. Not only is India "asking for a sky-high price" for Russia, but the EU plans to give India part of its order for artillery shells, which could cause huge fluctuations in Russian-Indian relations. India's strategic perspective may include Russia as a secondary partner. Russia's over-reliance on resource exports is a flaw, and this phenomenon may be difficult to change.
Even if Putin tries to revive Russian industry, elements such as money and talent are still scarce. Russia can only rely on "friendly countries" for blood transfusions. Without the war in Ukraine, Russia might still be immersed in the imperial dream. Reality has forced Russia to wake up, and India has taught them an expensive lesson.
Advice for India: keep a low profile while rising, because Russia is only forced to use the Indian rupee. If Russia recovers, it is likely to regain what it has lost. India should not underestimate Russia's potential and avoid offending a former partner that it will regret later.
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