Following international sanctions and Russia’s disconnection from the SWIFT system caused by the military operation in Ukraine, Russia and India are considering the possibility of creating a mechanism for trade settlements in national currencies.
The scheme is being developed under the auspices of Russian Central Bank and the government of India and may have a floating exchange rate that will be pegged to an international currency, most likely the yuan or US dollar.
Such mechanism is expected to be similar to one established for Iranian oil imports and will be crucial for trading as India purchases large volumes of products and commodities from Russia, including coal.
In 2021, India imported about 220 mio t of coal (+2.16 mio t or +1% y-o-y), of which 7.53 mio t accounted for material of Russian origin. Last year, the governments of India and Russia agreed to increase the supply of metallurgical coal up to 40 mio t/y. By 2025, the countries plan to expand bilateral trade volumes up to 30 billion USD from 8 billion USD in 2021.
In addition, Russian Central Bank and the People’s Bank of China are working to create a new financial messaging system that will become an alternative to SWIFT. The possibility of using the existing Chinese CIPS (China International Payments System) systems is also being considered.
Russian coal exports to China in 2021 amounted to 57 mio t (+17.4 mio t or +44% y-o-y).