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Current Affairs

Rupee-Rouble mechanism

Date: 15 April 2022 Tags: Basics of Economics


India is planning to revive the Rupee-Rouble mechanism which it had previously used in 1953 to bypass sanctions on Russia.



The Ukraine invasion has resulted in Russia being barred from using Dollars and Euros to conduct trade.



  • The arrangement is an alternative financial mechanism in which the payment will be settled in Rupees instead of Dollars or Euros.

  • The idea of Rupee-Rouble mechanism was first conceived under the Indo-Soviet trade agreement of 1953.



  • State Bank of USSR (Russia) would maintain one or more accounts with Indian commercial bank having authority to deal in foreign exchange. Another account can be opened in RBI.

  • The accounts of commercial banks will be used for all transactions conducted in Rupees while the account in RBI will be used to replenish the balance.


Areas covered

  • Insurance, freight, port charges, forwarding and storage expenses

  • Film distribution

  • Commercial or cultural tours

  • Maintaining embassy in India

  • All other commercial agreements


Need for revival

  • Due to sanctions imposed on Russia, more than $500 million payment for Indian exports is being delayed.

  • Many pending trade deals are awaiting clearance such as buying Russian crude oil and defence equipments such as S-400.

  • There are many deals in the pipelines such as Su-30 MK-I aircraft and MiG-29 fighter jets.