InvestorQ : Do you see payments for Russian coal in yuan as a long term arrangement or a stop gap?
Sam Eswaran made post

Do you see payments for Russian coal in yuan as a long term arrangement or a stop gap?

Moii Chavate answered.
1 year ago

The deal to import $25 million of coal from Russia by Ultratech and pay in Chinese Yuan is done. The question is whether this is a model for the future or whether India may not encourage too many such deals. To begin with, even Ultratech confirmed it was a stop gap arrangement. This is just being used in the absence of a rupee rouble pathway. India would not want to give the advantage to China at a time when geopolitical tensions between India and China have been at fulminating point. Trade dependence beyond a point is not prudent.

For India, any Chinese involvement cannot be a long term arrangement. The last thing that India would want is to help China globalize its currency and claim the privileges of the dollar. While Russia trade has picked in recent months, it is more of short term frenzy. Once the sanctions are lifted and prices are back to old levels the attractiveness of Russian base commodities may not remain. The key challenge for India is not to let China hijack the advantage and only have long term reliance on a rupee-rouble pathway.

How much longer can India fundamentally support the Russians at the cost of its friendship with the West? That is the million dollar question. India runs a trade surplus with the US but a massive trade deficit with China and with Russia. Indian economy has huge levels of dependency on the US and cannot act insular for too long. The time has come for India to decide. It has to either run with the hares, or it has to hunt with the hounds. The longer India takes to make a decision, the harder it is going to be to build trust all over again.