Shut out of key parts of the world’s currency interchange by Western sanctions, Russia began accepting India’s rupees directly as payment for oil and other exports.

Now Russia sits on a pile of rupees that other nations will not accept as payment for purchases.

“This is a problem,” Russian foreign minister Sergei Lavrov told reports on 28 April at a meeting of the Shanghai Cooperation Organization. “We need to use this money but these rupees must be transferred in another currency and this is being discussed now.”

When the West imposed sanctions on Russia’s exports, the Kremlin cut Russia’s oil price as much as 20 percent below market prices. India was one of the nations that snapped up the bargain fuel.

Largely because of oil purchases, India’s imports from Russia soared about sixfold during the year ending 30 April, data firm Vortexa reported. 

At the same time, India’s exports to Russia dwindled by 11.6 percent to $2.8 billion.

The Kremlin initially encouraged India and other trading partners to pay in their national currencies following sanctions on Russian banks and a ban on its access to the SWIFT international financial messaging system. 

“The volume of ‘frozen [rupees]’ can reach tens of billions of dollars,” Alexander Knobel, director of Russia’s Institute of International Economics and Finance, told Bloomberg. 

“The situation is aggravated by India’s historically high aggregate trade deficit, which reduces the possibilities of clearing settlements with third countries,” he added.

Russia also is India’s chief arms supplier, but that trade has stalled because of payment issues. 

India owes Russia about $2 billion for past weapons purchases but has been unable to pay because India fears violating Western sanctions. At the same time, Russia has hesitated to accept even more rupees to settle the bill.