Russia’s trade with India is flourishing despite Western sanctions, with bilateral payments progressing smoothly without the glitches that have plagued transactions with other countries, according to Anatoly Popov, Deputy CEO of Russia’s largest lender, Sberbank. Speaking to Reuters, Popov highlighted the robust nature of the economic relationship between Russia and India, pointing out the significant role Sberbank plays in facilitating this trade.
Sberbank, which manages payments for up to 70% of all Russian exports to India, has seen a marked increase in trade between the two nations. In 2023, Russia’s trade with India nearly doubled, reaching $65 billion. This surge has been driven largely by India’s position as a major importer of Russian oil, especially after the imposition of Western sanctions on Russia in 2022 due to its conflict in Ukraine.
“In 2022, there was a significant increase in the interest of Russian businesses in the Indian market because this market serves as an alternative,” Popov told Reuters in an interview ahead of the Eastern Economic Forum, a major economic conference that focuses on strengthening Russia’s ties with its Asian partners.
Sberbank’s Expansion in India
Sberbank has expanded its presence in India, with branches in major cities such as Delhi and Mumbai, and an IT center in Bangalore. The number of staff in its Indian offices has grown by 150% this year alone, following an announcement in April that the bank aimed to hire 300 IT personnel for its Bangalore hub. This expansion underlines the bank’s commitment to enhancing its operational capabilities in India, even as it navigates the challenges posed by Western sanctions.
Because Sberbank is under Western sanctions, it is barred from conducting transactions in U.S. dollars and euros or using the SWIFT system for international transfers. Despite these restrictions, Popov reported that the bank has not encountered any issues in India. “Sberbank is a full participant in all Indian payment and interbank systems. There are no restrictions on its operations,” Popov stated. India has maintained a neutral stance by not joining any anti-Russian sanctions and continues to maintain friendly relations with Russia, a fellow member of the BRICS group of emerging economies.
Smooth Transactions and Resolving Rupee Surplus
According to Sberbank, transactions in rubles and rupees are proceeding smoothly, with 90% of them completed in just a few hours. This is a stark contrast to Russia’s experience with other trading partners, such as China, where payments have faced delays. Popov emphasized that increasing Indian exports to Russia has helped address the problem of the rupee surplus held by Russian companies. This surplus had previously posed a challenge to bilateral trade in 2023, as rupees were primarily used to pay for imports from India.
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“The problem has been solved, there is no rupee surplus any longer,” Popov said, adding that for balanced trade to be fully achieved, India would need to increase its exports to Russia tenfold. An Indian source confirmed to Reuters on August 14 that the rupee surplus had been reduced to just “a few million dollars.”
Popov also praised India’s robust economy, noting that it had nearly everything Russian importers sought. “India is a self-sufficient, vast economy capable of meeting its own needs. Therefore, any goods that Russia previously imported can be purchased in India,” he said. This reflects a shift in Russia’s trade strategy, as it seeks to source more of its imports from India rather than relying on Western markets.
Innovative Financial Solutions and Regulatory Support
Sberbank is also expanding its range of financial products to cater to the growing trade relationship. The bank is developing its offering of hedging instruments, which already includes forwards and options. It is also providing rupee-denominated loans to Russian companies at rates significantly lower than those available in Russia. These financial solutions are designed to support Russian businesses operating in the Indian market, allowing them to manage currency risk and reduce borrowing costs.
Popov expressed gratitude to Indian regulators for allowing Sberbank to operate through rupee-denominated “vostro” accounts. These accounts, held by domestic banks on behalf of foreign banks in India, facilitate smoother operations and have been instrumental in overcoming some of the financial challenges posed by Western sanctions.
In conclusion, Sberbank’s positive experience in India highlights the strength of the bilateral economic relationship between the two countries. As Russia continues to face economic isolation from the West, its pivot towards Asia, particularly India, appears to be yielding fruitful results. With trade booming and financial mechanisms in place to support continued growth, the economic partnership between Russia and India looks set to deepen in the coming years.
