FT | Some days back a top forex trader and now monetary economist for HSBC Global Market remarked recently that following Russian Central Bank’s foreign currency dollar asset freeze order by US, it’s only a matter of time that the Russia would be forced to go for trading with the west in Rouble only or Rouble and Yaun/Renminbi currencies only to ensure it remains 100% risk free from sanctions and asset freezes, despite potential risk of inflationary costs at home.
India, one of the major economies and the largest democracy in the world has already been trading with Russia under Rouble – Rupee exchange agreements for many decades. Indian banking and finance lawyers privately say that India’s finance ministry along with Reserve Bank of India (RBI) and Bank of Russia is “racing against time” in exploring options to “internationalise” Russian version of the SWIFT version – SPFS, starting with India as a launch base outside Russia (being helped by the fact that India has reservations in dealing with China’s CIPS – China’s version for SWIFT – though it is ready to accept expansion of China’s UnionPay card payment system subject to restrictions).
In fact many Indian online retailers, like Israeli online retailers and service providers, have/are on the verge of setting up Russia’s Mir card payment system online to enable Russian citizens to trade with/buy products from India.
Israel has/soon to have similar arrangements in place. Turkey, Malaysia, Bangladesh, Argentina, Venezuela, Iran, Saudi Arabia, South Africa and many AU countries and of course China all have (or most already rushing to have) rouble + their respective currency exchange agreements in place.
A number of lawyers based at Indian corporate law firms in Mumbai say “they are working around the clock” like never before following the outbreak of Ukraine war, in advising number of governments of African Union countries on enabling rouble-based trades and also currently advising many of the corporations and conglomerates based in emerging markets on setting up rouble based contracts, given India’s half-a-century unsurpassed experience in trading with Russia under rouble – rupee exchange agreement/and or rouble – rupee swaps.
However, notwithstanding this, Indian corporate law firms are advising many large corporations based in the emerging markets to evaluate their governing contract and arbitration clause options and to seriously consider other major jurisdictions available as alternative to London, New York, Paris and Singapore, with the options of Dubai, Hong Kong being on the table among others.
Corporate law firms in India’s financial capital Mumbai say that government of India with the help of country’s premier members of the legal profession is also seriously considering to see current Russian-Ukraine crisis as “either or never” opportunity for India to emerge as future international arbitration centre alternative to London, Paris, New York, Singapore and Switzerland and evaluate whether it can become alternative to London and New York as governing law provider for English law or New York law respectively, by using India’s well established English common law system, though this is likely to take some time (Dubai, Singapore and Hong Kong provides a tough competition).
On another note, an Indian lawyer said they along with Hong Kong and Dubai based lawyers are advising banks in Bangladesh, UAE, Pakistan and African Union member countries alongside Bank of Russia in exploring options to consider rolling out/enable cross-border Russia’s Mir and China’s Union Pay systems in the said countries’ retail and commercial banking as well as to roll out rouble currency accounts for retail customers as FCY account options for customers wishing to open forex based rouble (or alongside limited capacity Renminbi Yua) fixed deposit schemes for the purpose of sending their children to Russia for education and medical treatments, given that Ukraine is out of the equation for many; until recently, Russia, Ukraine, Belarus, Georgia after the west, Turkey and the Far East was considered one of the most attractive cheaper alternatives for study medicine and study abroad for STEM subjects for middle class citizens from the emerging markets.
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