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- Russia’s former finance minister blamed Moscow’s accumulation of rupees for bringing the ruble down.
- Kremlin authorities have acknowledged the Russia has accumulated billions of rupees sitting in Indian banks.
- Russia’s Energy Ministry denied statements made by economist Mikhail Zadornov.
Mikhail Zadornov, Russia’s former minister of finance, attributed the ruble’s recent crash to the Kremlin’s stockpile of rupees that are stuck in India.
In an opinion piece for RBC, a local outlet, the economist called for the Russian Central Bank to intervene in the exchange rate markets, citing that the ruble’s levels would not organically reorient themselves under today’s environment.
In his view, the ruble’s current 95-per-dollar level is in part the result of Russia’s inability to convert rupees it earned via exports into its own currency, leaving the rupees stranded.
Energy trade between the countries blossomed since Russia was restricted by Western sanctions, but Moscow soon found out that the rupees used in the trade have little use in most global markets.
“We have nothing to buy in India, but we cannot return these rupees, because the rupee is an inconvertible currency,” Zadornov wrote. He estimated that Russia has sent $30 billion worth of oil-related products to India, and imported $6 billion-$7 billion worth of products.
The economist also cited other factors, such as stimulus given out to Russians. When this happens, demand for imports rises, therefore pushing the ruble down.
He said the ruble could return to 85 against the dollar, if Russia abandons stimulus and the central bank tightens monetary policy. Among other ideas, he added that future export agreements should be met with repatriation requirements.
Zadornov’s writings caught the attention of the Kremlin. It’s state-run Tass agency said Russia’s Energy Ministry denied he statements that stranded rupees weakened the ruble.
Moscow previously has acknowledged that Russia has accumulated billions of rupees that are sitting in Indian banks.
Russia prefers to be paid in Chinese yuan, which has become the most-used foreign currency in Russia. Meanwhile, Moscow has reportedly been hesitant about using the rupee due to exchange-rate volatility.
Russia and India previously suspended negotiations over using rupees for trade between the two countries. Russia and India remain deadlocked in a currency dispute that has also frozen weapons sales between the two countries.
