India, Russia mulling return to rupee-rouble trade

[dredger14]

India and Russia are mulling returning to the rupee-rouble trade arrangement to end the dependency on the volatile dollar and step up economic interactions.

Indo-Russian trade till the demise of the Soviet Union was based on rupee-rouble transactions, which had resulted in India emerging as the biggest trade partner of the former USSR in the developing world with two-way trade to the tune of USD 5 billion in 1991.
"The Central Banks of the two countries have agreed to hold consultations to study the possibility of using national currencies transactions in foreign economic operations between Russia and India," Bank of Russia said in a release.

According to the Bank of Russia (Central bank), both sides discussed the issue at the 15th session of Indo-Russian working group on banking and financial matters in Hyderabad earlier this month.

Russia, which has made its rouble a fully-convertible currency since July, 2008, is keen to add it into the basket of global reserve currencies on the backdrop of sliding value of the US greenback.
Earlier this week, the 15th session of Indo-Russian Inter-Governmental Commission (IRIGC), co-chaired by External Affairs Minister S M Krishna and Russian Vice-premier Sergei Sobyanin, said the commerce secretary-level Joint Task Force (JTF) should monitor implementation of its recommendations to promote bilateral trade, investment and economic cooperation.
The current bilateral trade is hovering around USD 7 billion. New Delhi and Moscow have set to boost it to USD 20 billion in 2015.

http://www.deccanherald.com/content/32014/india-russia-mulling-return-rupee.html

[raavan]

Good news..........

[ego docui history]

Russia is the Feds largest buyer of US currency. They basically buy it by the plane load and at a slight discount to face. The Fed likes it since they know the currency won't hit the US shores ever again (for the most part) and it doesn't effect their money supply numbers horribly so.
Plus, it make sense that Russia would diversify since diversity is (if done right) good. Sure, they will loose on some deals but overall it provides insulation for them. Plus it makes it easier for the Indians to pay their exhorbitant fees to fix the hardware they already bought from them in Rupees and not more valuable dollars.

[hskywalker]

Last time they did this it doesn't end up well for russia. India payed off all its soviet era rouble debt in dollars using post soviet exchanging rates, when rouble is virtually worthless against dollar.

[dredger14]

Last time they did this it doesn't end up well for russia. India payed off all its soviet era rouble debt in dollars using post soviet exchanging rates, when rouble is virtually worthless against dollar.

That was when India was a far worse poverty stricken country, this is 2009..
The Rs has gone up in value and is pretty much consistent unlike the dollar.

[Mango Madness]

Last time they did this it doesn't end up well for russia. India payed off all its soviet era rouble debt in dollars using post soviet exchanging rates, when rouble is virtually worthless against dollar.

Hyperinflation in Russia is a thing of the past now, although the ruble is more vulnerable to devaluation than most other major currencies due to the large impact oil price swings have on it.

[void]

Using USD for bilateral trade such as this is not a good idea when the US Federal Reserve is running the printing presses at warp speed and the US Government is running massive deficits. It basically means that Russia and India are importing inflation through the USD, switching to Roubles and Rupees would potentially strengthen both currencies.

[JBH22]

Last time they did this it doesn't end up well for russia. India payed off all its soviet era rouble debt in dollars using post soviet exchanging rates, when rouble is virtually worthless against dollar.

the fact INDIA repaid this loan in the 90's was itself a big thing given the state in which its economy was:cantbeli:

[Siddar]

Using USD for bilateral trade such as this is not a good idea when the US Federal Reserve is running the printing presses at warp speed and the US Government is running massive deficits. It basically means that Russia and India are importing inflation through the USD, switching to Roubles and Rupees would potentially strengthen both currencies.

It works both ways ether russia are india could simply turn on the printing presses and ship mountains of worthless currency to the other to pay offs debt on paper but in fact be paying off only a tiny % of the value of the debt. Of course they face same problem with Obama doing the same thing to all those holding dollars atm.

It still seems best to keep debts owed valued in a third party currency even if that is nolonger the dollar. Simply to much room for abuse happening on deals made only with local currencies.

[sepheronx]

It still seems best to keep debts owed valued in a third party currency even if that is nolonger the dollar. Simply to much room for abuse happening on deals made only with local currencies.

Yes, but it also opens up new possibilities. Instead of the rouble being tied to just oil and gas, it now opens up oppertunity to it being also equated to technology, defense, agriculture etc.

[void]

It works both ways ether russia are india could simply turn on the printing presses and ship mountains of worthless currency to the other to pay offs debt on paper but in fact be paying off only a tiny % of the value of the debt. Of course they face same problem with Obama doing the same thing to all those holding dollars atm.

It still seems best to keep debts owed valued in a third party currency even if that is nolonger the dollar. Simply to much room for abuse happening on deals made only with local currencies.

No, what separates the USD from other currencies is its perceived reserve status, and the fact that oil is priced and bought/sold with USD. Basically, this allows the US to export inflation overseas. if Russia, India, or any other nation turned on the printing presses, inflation would skyrocket. When the US does this, however, the inflation is spread and exported and very little of it is felt domestically inside the US.

Keeping trade in USD is an ok option if the US had a sensible monetary policy. Once the monetary policy turns more and more towards "quantitative easing" (a new fancy term for printing lots and lots of new money), it becomes less and less attractive for other nations to do trade in USD.