Russia on Friday pitched for the rupee-rouble route to boost trade with India and strengthen economic co-operation as it would insulate the countries from volatility against the dollar.

“Our country is looking at an investment protection and avoidance of double taxation agreement with India... We are also looking at trade in national currencies and a strategy for economic co-operation,” Russian economic development minister, Maxim Oreshkin, said addressing a joint business council organised by the CII on Thursday. Oreshkin is part of a delegation with Russian President Vladimir Putin to India.

A rupee-rouble mechanism will help the two economies hedge against foreign currency risks and bypass banking sanctions from the US against trade with Russia.

Data showed the rupee-rouble exchange rate has been considerably stable with the average rate of one rouble costing the rupee 1.01 to 1.13 in the past 90 days. On the contrary, the rupee has depreciated from 68.33 to 73.85 to a dollar.

Russia maintains that a return to rupee-rouble payments by bypassing the dollar will make it easier to hedge against foreign currency risks and make Russian crude and defence exports more competitive for Indian buyers.

However, Indian officials fear this will lead to Russia garnering a huge stock of rupees, which may complicate trade and currency valuation in the future.

“It would not be a good idea to enter into a rupee-rouble trade as trade surplus would always be with Russia. Market determined exchange rate would be the right thing to determine the value of the currency as bilateral exchange rate would have serious consequences,” N.R. Bhanumurthy of National Institute of Public Finance and Policy said.

In the 1960s, India had struck rupee payment deals with the then Soviet Union for military hardware.

However, the arrangement led to Russia being stuck with huge rupee balances as exports from India were a small fraction of their imports.