Trade with India: why the rupee channel never worked
The Russia–India bilateral trade in 2025 settled at roughly the same level as the previous year — somewhere in the range of USD 65 billion, with the bulk consisting of Russian crude flowing eastward and very little flowing back. The rupee-settlement framework, announced with considerable political fanfare in 2022 and 2023, has not closed that imbalance, and at this point it is reasonable to say it will not.
The reason is structural, not political.
The asymmetry problem
For a national-currency settlement framework to work, both sides need to have something the other side wants to buy in roughly comparable volumes. Russia and India do not. India needs Russian oil. Russia, beyond a relatively modest list of Indian pharmaceutical and agricultural exports, does not need very much of what India produces at the volume the oil flow generates.
The result has been the well-documented accumulation of rupee balances in Indian banks that Russian exporters cannot easily deploy. Rupee is not freely convertible. The Indian central bank has shown no enthusiasm for facilitating large-scale outward conversion. And Russian sellers have, accordingly, started declining rupee-denominated contracts where they have any pricing leverage.
Where the corridor actually goes
What has emerged in practice is a two-track structure.
The dirham channel through the UAE handles a growing share of the trade, particularly for transactions involving Indian private-sector buyers who are sensitive to secondary-sanctions exposure. The economic substance settles in dirham; the documentary trail involves Emirati intermediaries.
The yuan channel, via Chinese banks with operational presence in Mumbai or via Hong Kong correspondents, has become the second route. It is less clean from a relationship perspective — Indian buyers are not always comfortable settling through Chinese rails — but it works at scale.
For transactions where neither path is acceptable, the practical answer has been to denominate in dollars and accept the longer settlement times that come with using non-Western correspondents.
The takeaway
National-currency settlement is a useful political instrument when bilateral trade is roughly balanced. When it is not, it generates trapped balances and operational friction that the framework itself cannot resolve. India is a clear case of this. The lesson for other corridors — particularly for those being announced now in West Africa — is to look at the trade balance before celebrating the settlement architecture.
For specific corridor questions, contact info@gemini-cb.ae.