To avoid Russian sanctions, several Indian corporations and banks are using a method similar to that adopted when the US imposed a trade embargo on Iran. Exporters and importers are flocking to the UAE because New Delhi and Moscow have failed to devise a viable method of exchanging rupees for rubles. The UAE is a major transportation center and has a money market where many different currencies may be freely exchanged.
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Two senior bankers and a few trade organization members informed ET that freight movements and trade payments are moving via corporations and banks in Dubai. These transactions seem to be routine between India and the UAE. Nobody questions where the things came from or where they are going, not even the employees who handle payments. “Payments are paid as if the Russian leg does not exist, regardless of whether the transaction is import or export. Nonetheless, banks are aware of the true nature and purpose of the transactions.” The comment was made by the management of a large Indian bank.
This Was Accomplished When Iran Was Subject To Sanctions.
“Despite the fact that no rules are violated, all they do is shut their eyes.It’s happened in a few different goods in the previous several months, but not a lot. During the Iran sanctions, this occurred all the time.” This was said by the official. The UAE organization that collaborates with the Indian firm represents the original Russian importer or exporter, who may be the latter’s partner. Most Indian importers choose to pay in Emirates Dirhams rather than dollars to avoid dealing with the US currency and clearing procedures. Many banks trade dirhams into rupees, and the exchange rates are updated daily.
“The Indian customer is no longer concerned with how the money is delivered to the Russian vendor. There are many approaches to this. They claim that the Dirham is exchanged for the Renminbi, China’s currency. Some Russian banks are not on the list of those that cannot be used to settle payments. Similarly, another banker said that “the Indian exporter doesn’t care how the Russian buyer obtains funds, as long as the Dubai bank of the UAE intermediary releases payments.”
For a long time, Russian enterprises have done well in the United Arab Emirates. The UAE has made it more difficult to launder money in recent years, yet it remains a favorite destination for affluent Russians. When the person paying for the products differs from the person getting them, bill-to, ship-to is a popular approach to do international commerce.”
Many Russian Dealers, On The Other Hand, Would Like To Have The Commodities Routed.
Some diamond traders who used the UAE to get raw diamonds from Russia may have to alter their plans. In the United Arab Emirates, every diamond exporter has a bank account. As a result, making a payment in the United Arab Emirates is simple. The Russian miner was paid in euros or dollars for transporting the materials to the UAE, where they were picked up by Indian exporters. However, since Alrosa, a Russian miner, was placed on the sanctions list on May 7, everything has come to a halt.
Purchasing And Selling Rupees.
Russian banks in India recommended handling the nodal accounts for a hypothetical rupee-rouble transaction and holding the excess rupee balance at a meeting with the RBI in March (as imports from Russia exceed exports to the country). If an Indian bank had a nodal account, the US may sanction it. However, the Russian bank’s Indian branch would have to utilize the additional rupees. It might keep them with the RBI in the reverse repo window or lend them out in the interbank market.
The UAE route is being tested since India’s exports to some of its neighbors are declining due to the uncertainty in the rupee-rouble trade. Banks in Sri Lanka will not accept letters of credit from Sri Lankan banks because they are concerned that the government would not be able to repay them. As a result, practically all supplies to Sri Lanka have ceased. To avert a currency crisis, Nepal may restrict luxury imports, which might harm commerce with that nation.
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