russia Has Fallen into the “Rupee Trap”

Huge sums in Indian rupees have accumulated in the accounts of russian companies in India as payment for oil. We are talking about the equivalent of hundreds of billions of US dollars. Despite requests from the russians, India is in no hurry to provide a way to access that money.

Since the start of the full-scale invasion of Ukraine and the imposition of international anti-russian sanctions, oil payments between russia and India have been made in rupees. For this purpose, russian exporters hold special Vostro accounts at Indian financial institutions. At the same time, there is virtually no mechanism for withdrawing funds from India. The rupee is a limited-convertible currency, so there are strict regulations governing its use, especially for non-residents. These funds can only be used to pay for imports of Indian goods, local taxes, or to invest in Indian projects. However, the Reserve Bank of India must grant permission to purchase stocks or bonds, and it is still only “considering” such a possibility.

Recent developments in the Persian Gulf and the temporary easing of US sanctions on russian oil have spurred Indian refineries to step up their purchases of crude from the rf. This means that the volume of unused rupees will only continue to grow. For example, from April to December 2025, trade between russia and India amounted to $63.6 billion, of which approximately $59 billion was oil exports. The benefits for the Indian economy are clear: oil is purchased at significant discounts, while the money remains in the national economy, as it is held in Indian banks.