“Like the gas deal between China and Russia, the Indian-Russian agreement on ruble-rupee trade will increase the amount of world trade which is not denominated in the dollar,” professor with the Department of Political Studies at the University of Manitoba, Radhika Desai told Sputnik, adding that the “agreements between major emerging economies to trade in each other currencies will further pluralize the still small number of trading currencies and diminish the use of the US dollar, the Euro and other such hitherto-dominant trading currencies.”
“The agreement is part of a more equal deal between the two countries in which both are seeking to reduce the international role of the US dollar, to increase the international role of their own currencies and to create alternative structures of international economic governance – such as the recently agreed upon BRICS bank and the Contingent Reserve Fund as well as others such as the Chiang Mai Initiative – which are not controlled by the West,” Desai said.
However, Chris Devonshire-Ellis, the chairman of Dezan Shira & Associates Asia disagrees. He said that the use of other currencies “makes sense on a specific bilateral basis such as Russia and India or China, but not in other instances.”
Mikhail Kuzmin, a financial analyst at Investcafe, told Sputnik that the use of national currencies, instead of using the dollar, in foreign economic transactions between Russia and India could “support the ruble to a certain degree, though this measure will not seriously change the currency market.”
“The impact on the national currencies will be limited, as in order to conduct the operations Russia will have to buy the Indian currency, therefore using the ruble, and the impact on the exchange rate will not be completely positive,” Kuzmin explained.
Anna Bodrova, a senior analyst with Alpari underlined that Russia and India had well-established trade and economic ties with plans in place for them to be extended. Moreover, she commended the prevalence of business interests in stepping up trade in domestic currencies.
According to Russian Ambassador to India Alexander Kadakin, the current annual trade volume between Russia and India is about $10 billion. Trade with China, Bodrova recalled, amounts to $65.9 billion, which gives a lot of room for an expansion in the partnership, particularly with the current situation of sanctions being imposed by the West against Russia.
“By elaborating the scheme of direct rupee-ruble transactions, the sides are laying the ground for further work. The success of the initiative demands consent on both sides, as well as currency swap agreements,” Bodrova said, adding that rupee-ruble transactions will have little pressure on the dollar as it takes a long time to shift to national currency transactions.
“I also argued in my book, Geopolitical Economy that since 1971 the US dollar has only retained its international role because of the extremely high volume of international dollar denominated capital flows such speculation creates,” Desai said.
In November, Russian President Vladimir Putin said that Russia planned to quit the “dollar dictatorship” in global trade and begin to increase the use of other national currencies.
The views and opinions expressed in the article do not necessarily reflect those of Sputnik.