By Mahua Venkatesh
New Delhi, Feb 28: The stringent sanctions against Russia following its invasion of Ukraine could push non dollar trade in the coming months. Following the sanctions by the US, UK and several other nations, Russia is already looking at expanding its trade network with China.
According to a Reuters report, Harry Broadman, a former US trade negotiator said that the new sanctions could prompt Russia to try to deepen its non-dollar denominated trade ties with Beijing in an effort to skirt the restrictions.
In 2020, trade between Russia and China stood at $107 billion - an increase from the $58 billion a decade ago. While China imported $57 billion worth of goods from Russia, its exports to Moscow were $50 billion which led to a Chinese trade deficit of $7 billion.
Reuters, also quoting World Bank and United Nations trade data, said that since lesser sanctions were imposed in 2014 after Russia annexed Ukraine's Crimea, China has emerged as its biggest export destination. Investments have also gone up between the two countries.
India too on its part could look at ways to set up a rupee payment mechanism with Russia.
"This would be beneficial as the dollar dependence is actually eased for India," an analyst said.
In December, during Russian President Vladimir Putin's visit to New Delhi, India and Russia signed a host of trade and economic deals. The two countries also signed a deal allowing India to manufacture more than 600,000 Kalashnikov assault rifles.
In the last few years Russia has managed to reduce its dependence on dollars. While it is sitting on foreign exchange reserves of more than $630 billion only 16 per cent of this comprises US dollars.
That apart 35 per cent of Europe's total energy needs are sourced from Russia.
The New York Times said, "As Russian troops fan out across Ukraine, the US and its allies are reluctant to impose sanctions on Russian energy so not to hurt their own economies. Alternatively Russia could turn off the taps to pressure the West. Either way everyone is hurt."
"Any disruption of oil supply will only increase the pain for the world and countries including the US and European economies are in no position to risk that a time when the global growth rate has been severely impacted due to the Covid 19 pandemic," Nirupama Soudararajan, CEO Pahle India told India Narrative.