Russia Pushes Its SWIFT Alternative to India for Ruble Payments; All Eyes on Lavrov's Visit

Russia has informed India that it can share an interbank transfer system for payments in rubles, even as New Delhi is looking to increase its purchase of oil and weapons from Moscow.

Local reports from India had said a few weeks earlier that the country's government was moving ahead with setting up an alternative payments system to maintain its trade with Russia.

Bloomberg reported on Wednesday that the Russian plan involves rupee-ruble-denominated payments using Russia's messaging system SPFS.

SWIFT platform
SWIFT platform

Lavrov Visits India

Following Russia's invasion of Ukraine in February, Moscow was expelled from the SWIFT international payment platform. In the aftermath, many major Russian banks were severed from SWIFT, effectively denying them access to international markets. SWIFT is a messaging network that financial institutions use to securely transmit information and instructions through a standardised system of codes.

The proposal is likely to be adopted when Russian Foreign Minister Sergei Lavrov visits India later this week for bilateral talks.

Officials from the Russian central bank will also visit India in the upcoming week, the report said, citing unnamed sources.

India's Russian Imports

Apart from strategic weapons, India imports key materials like oil, edible oils and fertilizers from Russia. India sources about 12 percent of its total imports of edible oils from Russia, besides importing large supplies of muriate of potash from Russia and Ukraine. India's crude imports from Russia account for 2.3 percent of its total crude oil imports.

India China discussion in Moscow
Russia's Foreign Minister Sergei Lavrov, India's Foreign Minister Subrahmanyam Jaishankar and China's State Councillor Wang Yi pose for a picture during a meeting in Moscow, Russia September 10, 2020. Russian Foreign Ministry/Handout via REUTERS

Earlier reports said Russia and Iran have been cooperating to connect their interbank messaging systems in order to bypass the SWIFT financial transactions network. Both countries are facing severe Western sanctions, making settlements in trade through SWIFT difficult or impossible.

How SWIFT Ban Affects Russia

Cutting Russia off the platform will have a serious impact on the way the daily financial business is transacted. The country's banks will be forced to conduct all businesses directly through a horde of international financial institutions, which will be chaotic, slow, and haphazard.

More than 40 percent of Russia's revenue comes from the oil trade. A quick ban on Swift will be lethal to the Russian economy. The impact of SWIFT ban on Iran is a case in point. According to Alexandra Vacroux, executive director of the Davis Center for Russian and Eurasian Studies at Harvard University, Iran lost half of its oil export revenues and 30 percent of its foreign trade after it was thrown out of SWIFT.