Russia ignores the use of the dollar and makes billion-dollar purchases of Indian weapons with local currency

Russia recently acquired about US$4 billion on defense equipment and weapons manufactured in India, using the local currency, the Indian rupee. The transaction was disclosed by Firstpost on May 10th.

The funds for this purchase were idle in Vostro accounts managed by Indian banks on behalf of foreign banks. In October, Russian exporters held about US$8 billion em rupees indian in these accounts, created to facilitate trade between Moscow e Nova Deli.

Western sanctions imposed on Russia have led Moscow to join 22 other nations whose banks have opened specific Vostro accounts in India to trade in the local currency.

Increased Indian imports of Russian crude oil contributed to the growth of rupee deposits in these accounts.

Two unnamed sources reported that in six months, Russia used about half of the funds in these accounts.

“It is difficult to say the exact amount in Vostro accounts as some transactions are very complex. However, during the last 6-8 months, a large portion of the amount has been utilized,” said one of the sources.

Russian rupee funds were also invested in Indian government treasury bonds. At the end of March last year, there was speculation that Moscow’s investment in these bonds would be US$ 10 a 12 billion.

“Both New Delhi and Moscow have been working to resolve the issue of backlog of payments in Indian currency on the Vostro account,” the second source said. “Indian exports are also being settled with Russian funds from the Vostro account.”

The use of local currencies to conduct trade is in line with the BRICS intention of de-dollarization, aiming to reduce dependence on the US dollar.

China and Russia, the bloc’s founders, plan to conduct $260 billion in trade this year without using the dollar.

De-dollarization efforts increased in 2023, when Beijing and Moscow officially decided to trade using the Yuan and Ruble.

The BRICS bloc has seen a growing demand for membership. Iran, Egypt and the United Arab Emirates became official members in January this year, while Bahrain, Kuwait, Pakistan, Algeria and Palestine are pending candidates.

Moscow’s purchase of Indian weapons follows reports that India continued to sell weapons to Israel during the war in Gaza, using the “dual use” loophole, claiming that the products were intended for non-military sectors.

These transactions highlight the growing role of trade in local currencies among BRICS nations, strengthening their economies and decreasing the influence of the US dollar on international trade.