Playing currency strategies: oil, rupees and currency restrictions

Recent events on the world stage show that economic relations between countries can acquire unprecedented risks and unexpected turns. An example of such a surprise was the "gift" from India, which cost Russia a lot of effort and money, and also brought to light interesting details of the currency strategy game.

India, like many other countries, is seeking to de-dollarize its economy. This strategic decision assumes that foreign trade transactions will be carried out in national currencies, bypassing the dollar. Thus, India went on an experiment by making a deal with Russia to trade in national currencies.

Indian rupees for Russian oil.

A deal between Russia and India to trade in national currencies led India to buy Russian oil in Indian rupees instead of dollars. The deal resulted in Russia acquiring over $40 billion worth of Indian rupees. However, this led to a situation where rupees were not convertible outside of India.

Russia is faced with the problem that it can only use the accumulated rupees for purchases from India. This creates limited opportunities to exchange currencies for other currencies such as dollars or euros. The Russian government even asked India to exchange rupees for another currency in order to diversify its reserves.

Partner dependency.

India, being the main partner in this deal, received certain advantages. She found herself in a situation where her goods and services could only be bought with accumulated rupees. This may lead to a decrease in demand for Russian goods, as other countries will not be ready to use a non-convertible currency for purchases.

The situation looks like a complex game in which one side buys oil and the other side provides non-convertible currency. The question arises of what benefits both parties can derive from such a deal. India may continue to sell the resulting oil on the world market, while Russia may lose the diversification of its reserves due to the limited use of rupees.

Unexpected "gift".

The deal was an unexpected "gift" from India, which raised questions about strategic de-dollarization and dependence on partners. Russia faces the challenge of diversifying its foreign exchange reserves, while India continues to strengthen its economy and position on the world stage.