MOSCOW: Russia’s disconnection from the SWIFT international payment system could result in unexpected consequences, as several countries are now considering the development of alternative instruments.
Eleven countries have already joined the Russian MIR payment system, and over 15 have expressed their readiness, India among them.
India and Russia are already in talks to integrate their respective payment mechanisms to ensure trade between the two nations does not suffer. The two countries need to develop a financial system which would not be affected by Western sanctions on Russia.
In July, for the first time, goods from Russia were shipped to India by land. The new trade route, which allows goods from Russia to pass through Central Asia and Iran, solves two problems at once - the tedious transport by ship through the Suez Canal and the fear of malicious sanctions.
Russian ambassador to India Denis Alipov predicts 40 per cent increase in trade volume this year. Oleg Deripaska, the founder of En+ Group and RUSAL, declared a similar position in his recent interview. He assesses the potential of bilateral trade volume between the two countries at $120-150 billion over the next decade.
Mutual recognition of the Russian and Indian payment systems looks like a logical step. Though the rupee-ruble trade has not been successful in the past, the ongoing geopolitical shifts have prompted both countries to work on resolving the bottlenecks.
The countries are already in talks to expand the use of national currencies in bilateral trade payments. The arrangement essentially facilitates the settlement of payment between the two countries in their currencies, instead of the US dollar, the euro or the British pound. “The payment system is strategic now, given the current situation and sanctions against Russia. It is of utmost importance to have self-reliance in the payments system and we need to work towards that,” SJM national co-convenor Ashwani Mahajan told India Narrative.
“We have our own payments system, we need to see how to expand its global acceptance,” Mahajan said, adding India must attempt to integrate its own payments system with Russia’s indigenous MIR.
Thus, the US move to cut off Russia from SWIFT has only brought the focus back on the necessity of de-dollarisation of global trade.
In the current geopolitical and economic context, the formation of new strategic alliances and the development of local market-oriented systems is a prerequisite for India and other countries in the East to reap the benefits.