India, Russia suspend negotiations to settle trade in INR

• India and Russia have suspended efforts to settle bilateral trade in INR, after months of negotiations failed to convince Moscow to keep INRs in its coffers, two Indian government officials and a source with direct knowledge of the matter said.
• This would be a major setback for Indian importers of cheap oil and coal from Russia who were awaiting a permanent INR payment mechanism to help lower currency conversion costs.
• With a high trade gap in favour of Russia, Moscow believes it will end up with an annual INR surplus of over USD40bn if such a mechanism is worked out and feels INR accumulation is ‘not desirable’, an Indian government official, who did not want to be named, told Reuters.
• The INR is not fully convertible. India’s share of global exports of goods also is just about 2% and these factors reduce the necessity for other countries to hold INR.
• Russia is not comfortable holding INR and wants to be paid in CNY or other currencies, a second Indian government official involved in the discussions said.
• “We don’t want to push INR settlement any more, that mechanism is just not working. India has tried everything we could to try and make this work but it hasn’t helped,” a third source who is directly aware of the developments said.
• Another official said both countries have started looking for alternatives after the INR settlement mechanism did not work out but did not give details.

External Link : https://www.reuters.com/markets/currencies/india-russia-suspend-negotiations-settle-trade-rupees-sources-2023-05-04/