Why did Russia abandon the Indian currency?

Russian endeavors to get rid of the monetary hegemony of the West, but it is not easy, because these endeavors face challenges.

Since the outbreak of the Russian-Ukrainian war on February 24, 2022, the isolation imposed on Russia by the West has increased, but this isolation was not limited to the political aspect.

The matter went beyond harsh and unprecedented economic sanctions aimed at paralyzing the pillars of the Russian economy. However, Moscow, in its attempt to circumvent the sanctions, moved away from Western currencies, to replace them with the currencies of other countries, but it faces “technical” problems.

Accumulation of Indian currency

 Russia has billions of rupees (the currency of India) accumulated in Indian banks, which are used as an alternative to the US dollar, but Russia has acknowledged that there is a problem related to the possibility of converting the rupee into other currencies, according to Business Insider India.

This comes after Russia and India suspended negotiations regarding the use of the rupee in trade between the two countries.  

The stalled talks are a "blow" to Indian importers of low-cost Russian oil and coal, who have been looking for a sustainable rupee payment mechanism that would help lower currency exchange costs for Indian buyers, Reuters explains.

Huge surplus

 Russia believes that with a large trade gap in its favor, it will have an annual surplus of rupees worth more than $40 billion, if the mechanism is activated.  

In this regard, an Indian official, who was not named, said that Moscow is now feeling that hoarding the rupee “is undesirable.

The Russian hesitation comes due to the instability of the rupee exchange rate, which could cost Moscow great losses.  According to Business Insider India, Russians tend to deal in Chinese yuan rather than rupees.

Trade balance between India and Russia

 Since the outbreak of the Russian-Ukrainian war, Russia's exports to India rose to $51.3 billion as of April 5, after it was estimated at $10.6 billion a year earlier, according to another Indian government official, whom Reuters did not name.

 Oil exports jumped more than 12 times what they were before the war, with European markets almost completely abandoning Russian energy.