Billions of dollars worth of Russian oil profits “trapped” in India are “directly causing the depreciation of the ruble exchange rate”, a former Kremlin finance minister has said.
At least $1 billion of Russian proceeds (£800 million) are getting stuck in New Delhi every month, according to experts, money which could prove vital to Vladimir Putin sustaining his war effort.
Western sanctions have isolated Russia from trading on the dollar, the global currency, which has forced the Kremlin to sell commodities to countries such as China and India in their local currencies, the yuan and rupee respectively.
But the rupee is an “inconvertible currency”, one economist told Newsweek, because it lacks the reserves to guarantee a stable exchange rate and could, in turn, curb the Reserve Bank of India’s (RBI’s) ability to manage domestic money supply.
This has left billions of dollars unable to leave the country, while a trade in goods is not possible given India’s poor export offers. As a result of these restrictions, as much as $39 billion (£31 billion) could be stuck in Indian bank accounts, according to Reuters.
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Mikhail Zadornov, a former Russian finance minister and ex-head of one of the country’s largest banks, wrote a column in a Russian state newspaper last month claiming that the “trapped” money was directly hurting the local economy.
He said the failure to return these earnings from exports to India is “the direct cause of the depreciation of the [ruble] exchange rate this summer”.
“Another non-obvious reason for the weakening [of the ruble] is the stuck rupees. Russia supplied $30 billion (£24 billion) worth of oil and petroleum products to India in the first half of the year, and our imports from India are estimated at approximately $6-7 billion (£4.7 – 6 billion) per year,” he wrote.
“We have nothing to buy in India, but we cannot return these rupees because the rupee is an inconvertible currency.”
Russia’s only option to use the money at the moment appears to be spending or investing it in India. This will not help plug the bottomless hole caused by its war spending.
Russia makes changes to Moscow air defences following drone attacks
Russia has “recalibrated” their air defences around the capital following a series of Ukrainian drone attacks.
While air defence systems have been placed around Moscow – even on top of the defence ministry – for months, small unmanned aerial vehicles (UAVs) flying beneath the radar have been difficult to detect and destroy.
These systems have now been recalibrated to “effectively defend against the (UAV) attacks”, according to a British Ministry of Defence report, in what they alleged was a double-message.
“This is almost certainly to allow the system to detect and engage UAV-type targets,” the MoD said.
“However, it is probably also intended to act as a high-profile reassurance to the public that the authorities have the threat under control.”
Kim Jong-un arrives in Russia
North Korean dictator Kim Jong-un has arrived in Russia ahead of talks with Vladimir Putin.
Aboard the infamous armoured state train, Kim crossed over the border into Russia in its far east, eventually stopping at Ussuriysk.
Unlike other official meetings between two world leaders, details of the trip have not been made public. Only yesterday did the Kremlin acknowledge a meeting would take place, despite US claims the week prior that such a trip was going to happen.
It had been rumoured that the pair would meet in Vladivostok, where they last met in April 2019. But Kim’s train appears to have bypassed Vladivostok and is heading for Khabarovsk, which is in a different direction.
There will be two meetings: one between the two delegations, and a one-on-one for just the two leaders. An official dinner will take place after that, reports Tass news agency.
Umerov holds first meeting with US counterpart
Ukraine’s new defence minister has held his first official meeting with his US counterpart Lloyd Austin.
The pair spoke over the phone about the “urgent needs” of Ukraine and an upcoming Ramstein meeting, during which allied ministers will convene to discuss how best to resist Russia’s “special military operation”.
Rustem Umerov officially took over from Oleksiy Reznikov last week following the latter’s dismissal by Volodymyr Zelensky over corruption issues in the defence ministry.
Mr Reznikov is tipped to become the next ambassador to the United Kingdom.
Good morning from London. I’m Tom Watling. I’ll be bringing you all the latest developments on the war in Ukraine.
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