Ahead of Russian foreign minister Sergei Lavrov’s visit to India, Moscow has assured New Delhi that there is “no restriction of any kind” on settling transactions in the national currencies of the two countries.

Also, the sanctions imposed by the US, UK and EU on its largest lender Sberbank, which has a branch in India, don’t pose any risk to Indian companies and financial institutions dealing with it, Russia has told India.

“There is no restriction of any kind related to the settlements in national currencies of Russia and India,” the Russian embassy said in a letter explaining the sanctions on Sberbank to the ministries of external affairs, finance, and commerce and industry as well as the Reserve Bank of India (RBI). The note was reviewed by ET.

This suggests that the two countries might consider a rupee-rouble mechanism to settle trade in goods to avoid sanctions imposed by the West.

Lavrov is scheduled to visit India on March 31 and April 1, the Ministry of External Affairs (MEA) announced on Wednesday. This will be the first high-level visit by a Russian official to India after Moscow launched its military offensive against Ukraine on February 24.

Opportunity to Exporters

ET was the first to report that Lavrov will visit India.

The letter noted that current challenges to a great extent are due to an inaccurate interpretation by Indian banks of the unilateral sanctions imposed by third countries.

“The restrictions do not pose any risk to Indian companies, financial institutions and private clients dealing with Sberbank,” it said.

Russia also said that the bank’s international transactions are carried out in an “ordinary manner,” subject to compliance with certain orders.

As per the letter, Sberbank and its subsidiaries can interact and transact with any financial institutions except US and UK entities, and branches of foreign institutions “specifically located” within these two countries.

“Such sanctions imposed do not restrict in any type, account opening and account management and serving the clients from the Indian credit institutions,” Moscow said in the letter, adding that the list of sanctions imposed by other states that apply to the Sberbank Group mirror those by the US, UK and EU.

A rupee-rouble trade mechanism could be established soon, said A Sakthivel, president of the Federation of Indian Export Organisations (FIEO). According to Sakthivel, the Indian government is working on a proposal to allow four to five state-owned Indian banks to be engaged in such trade. There have been consultations among the central bank governor, the finance minister and banks in this regard, he said.

Sakthivel added that the international sanctions on Russia provide Indian exporters with an opportunity to expand in that country’s market.

India exported goods worth $3.3 billion to Russia in 2021, mainly pharmaceutical products, tea and coffee. Imports were valued at $6.9 billion, including defence goods, mineral resources, fertilisers, metals and precious stones.

India has abstained from several United Nations votes on the conflict while highlighting the need for upholding the UN charter and matters of territorial integrity and sovereignty.

Lavrov is expected to brief India on Russia’s operations and peace talks with Ukraine. India will call for an early cessation of hostilities and push for dialogue and diplomacy to end the impasse, ET had reported earlier.

Indian oil companies have purchased Russian oil at discounted prices to meet domestic demand amid high global crude prices. On Wednesday, Brent crude was trading near $113 a barrel. Oil companies have started to raise fuel prices in increments after a gap of nearly five months following state elections.