India and Russia discussed international trade settlement in Indian rupees during the 24th meeting of the Inter-governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation that was co-chaired by external affairs minister S. Jaishankar and Russian deputy Prime Minister Denis Manturov in the capital.

The Special Rupee Vostro Account system is an issue the two countries have been working on for a while to insulate Indian imports of Russian products from western sanctions, particularly now that the volumes have multiplied as Delhi took advantage of Russia offering oil and gas at discounted rates in the wake of its war with Ukraine.

According to the Russian readout on Manturov’s meetings on Tuesday with ministers other than the engagement with Jaishankar, he discussed with finance minister Nirmala Sitharaman the necessary steps to ensure uninterrupted mutual settlements primarily with the use of national currencies. “Mutual interest in concluding a Russian-Indian agreement on the encouragement and mutual protection of investment was noted.”

In February, Russian ambassador to India Denis Alipov had told reporters that the two countries had established a mechanism for rupee-ruble trade but Indian banks were reluctant to use it for fear of US sanctions.

Manutrov stressed the need to intensify work on the finalisation of a free trade agreement between the Eurasian Economic Union — of which Russia is a part — and India. The discussions have been underway for some years now but got stalled by the pandemic.

While the Russian side lauded the fact that the trade turnover between the two countries had increased 2.6 times last year — exceeding $35 billion against the target of $30 billion by 2025 — India underlined the need to address the trade imbalance. A concern for India for years, the trade imbalance has grown with the spike in volumes since February last year when Russia’s war with Ukraine began.

Speaking at a meeting with Indian businesses on Monday in the presence of the Russian deputy Premier, Jaishankar had said: “We need to work together with our Russian friends on a very urgent basis on how to address that imbalance. And addressing that imbalance really means addressing the impediments.”