National currencies will find greater use but may not replace U.S. dollar any time soon: former Indian envoy to Russia

India is selling Russian oil to the West, claims Russian academic

Published - November 11, 2022 09:48 pm IST - NEW DELHI

Former Indian Ambassador to Russia D.B. Venkatesh Varma. File

Former Indian Ambassador to Russia D.B. Venkatesh Varma. File | Photo Credit: Special Arrangement

National currencies will find greater use in the near future but they are not likely to replace the American dollar any time soon, according to a veteran Indian diplomat. Addressing an online event organised by Russian media outlet Sputnik on Friday, former Indian ambassador to Russia D. B. Venkatesh Varma said that a “basket of currencies” could also be considered for future usage to deal with economic disruptions.

The issue of transacting in national currencies has acquired greater resonance in recent months as India-Russia trade and defence ties are facing payment issues because of sanctions on Russia due to its conflct with Ukraine.

“The notion of increasing use of national currencies has been under discussion for a number of years. But what has changed is that now the urgency has increased considerably. Over a period of time, number of countries are believing that holding all your accounts in dollars is not such a good thing. So there is a certain tendency towards moving away from the dollar, but to believe that this will lead to de-dollarisation of the global economy very quickly - I think is not going to happen,” said Mr. Varma, who served as India’s ambassador to Russia till last year.

The issue of payment in national currencies has acquired an urgency in view of the booming energy trade between Russia and India. According to the energy cargo tracker Vortexa, Russia has emerged as India’s largest energy supplier in October, surpassing traditional suppliers like Saudi Arabia and Iraq. Russia supplied 935,556 barrels per day of crude oil to India during the last month. Till March this year, Russian imports amounted to just 0.5% of India’s total energy imports, but that has now increased to 22%.

Andrey Volodin, Professor of the Diplomatic Academy of the Ministry of Foreign Affairs of the Russian Federation, said that the Ukraine war had created difficulties in the international system but it had also thrown open new opportunities that did not exist previously. “Russian oil has come in handy for India. So, there is no secret that India sells Russian oil to western Europe and the United States,” said Prof. Volodin, adding that India would not allow its national economy to suffer as it is mindful of the private capital enterprises.

Apart from trade in energy, defence deals between India and Russia are another domain where larger payments are still facing some issues. The Hindu had earlier reported that the issue was discussed during External Affairs Minister S. Jaishankar’s visit to Moscow where he held talks with his Russian counterpart Sergei Lavrov on November 8. Reports came in that “milestone payments” which are to be made as per delivery timelines have been delayed. In some cases, India’s payments are yet to be cleared although deliveries have been made by Russia.

To deal with the emerging difficulties in transactions in the American dollar, Mr. Varma suggested a “basket of currency” approach, noting that this has been considered in bilateral and multilateral dialogues.

“Over the long run, less and less countries will use dollar as the only currency. Other alternative is to create a basket of currency which has been under consideration for a number of reasons,” said Mr. Varma, noting that national currency payments have been discussed within the BRICS grouping of emerging economies, the Shanghai Cooperation Organisation (SCO), and with certain Gulf economies. “National currency will be used in greater quantity in future. It is not temporary and it is long term. But it will not replace dollar in a hurry. Many countries will move towards a mix -- a new hybrid form of international currency payments,” said Mr. Varma.

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