by PRABHAT PATNAIK
Russia will enter into bilateral trade agreements with a large number of countries to beat Western sanctions.
Before joining the neo-liberal order, India used to have “rupee payment arrangements” with the Soviet Union and Eastern European socialist countries under which the main international reserve currency, the US dollar, was used neither for settling transactions nor even as the unit of account in terms of which the trade-related transactions were denominated. The dollar, in short, was used neither as the means of circulation, nor even as the unit of account under these “rupee payment arrangements”.
Instead, bilateral trade was denoted in terms of Indian rupees (or Russian roubles, whose exchange rate against the rupee was fixed); and the balances in trade that got built up in favour of one country against the other were not immediately settled. Further, even into the settlement of these balances, the dollar did not enter; they got carried over and were bilaterally settled over a period of time. The whole idea was to ensure that neither country’s export to the other was constrained by the absence of dollars with the latter. This means that the trade that occurred through this arrangement would not have occurred otherwise, so that the “rupee payment arrangement” was “trade creating”.
It was an eminently sensible arrangement. If country A has goods that country B needs, and vice-versa, then it seems absurd that each of them remains deprived of this mutually-beneficially exchange, simply because each has not made enough exports to country C to earn enough dollars; that is, they do not have enough dollars through exports to the metropolis or to countries from which they can obtain dollars.
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