India Potash’s rouble-rupee payment deal stumbles in Russian bank -Breaking
© Reuters. FILEPHOTO: This illustration photo shows an India Rupee Note. It was taken June 1, 2017. REUTERS/Thomas White/Illustration
Aftab Ahmed and Nidhi verma
NEW DELHI (Reuters). Russia’s Sberbank still has not processed the first payment of Indian Potash Ltd. (IPL) as per a deal that was in place before the Ukraine conflict to permit IPL to make payments for Belarusian Potash using rupees and dollars. According to Reuters, two sources who are familiar with this issue have seen a letter.
India’s prewar payments deal is in shambles. This could spell doom for its plan to establish rupee-rouble trading mechanisms to bypass dollars and euros and avoid U.S. sanctions.
IPL opened a rupee account at Sberbank’s New Delhi Branch in February. This was requested by Belarusian Potash Company, (BPC), because Belarus has been subject to increasingly severe U.S. sanctions following a fraudulent 2020 election Washington declared fraudulent. Minsk contests this.
In December, U.S. sanctioned the state-owned BPC.
According to IPL letters addressed to Ivan Nosov (Reuters), IPL paid 1.77 billion Indian Rupees ($23 Million) its first installment to Sberbank’s branch in India.
A May 23 letter stated that only a small amount of rupees was converted into roubles for BPC. It also said IPL couldn’t wait indefinitely to process the transaction.
The bank said that if it confirmed the inability to complete the transaction, then “we are afraid we will call our funds back.”
IPL indicated in the correspondence that it required a reply within two days from the date the letter was sent.
One source said that Sberbank had not responded to the request. He spoke on Monday under anonymity.
Sberbank refused to comment. Reuters did not receive comment from IPL or India’s fertiliser and finance ministries. BPC did not respond to Reuters requests for comment immediately.
Second source claimed that IPL payments had been hampered due to sanctions against Russia following the invasion of Ukraine. According to the source, “That made payment difficult in roubles because Russian banks were prohibited from using SWIFT mechanism.”
India and Russia had discussed setting up a rupee/rouble payments mechanism in order to ease trade. Russia also proposed that Russian companies and banks open accounts with Indian government banks for settlement of trade transactions.
Sergei Lavrov from Russia was visiting the United States in April. He called for an arrangement to stop dollar- and euro-based business.
However, IPL’s experiences suggest that such mechanisms may still be challenged even if it is possible to use euros and dollars.
Three officials from India said that India would be cautious about setting up any rupee-rouble trading payment system, as long as fighting in Ukraine is still raging. There were also calls for Russia to be isolated by Washington and European capitals.
According to one official, India will likely hold any rupee-rouble payments mechanism until signs indicate a deescalation in Ukraine.
($1 equals 77.5780 Indian Rupees).