At present, Russia is classified in Group B, along with China, South Africa, Sri Lanka, South Korea, Romania, Spain, Greece and Hong Kong. The members of this group are considered as favourable trade partners. The sources said that Russia is likely to be brought down to Group D.

"Member nations of Group D are considered to be highly risk-prone countries, with chances of default. Russia is likely to be kept in that group because of the defaults made by the Russian banks," the sources added.

"ECGC does not wish to continue with the present gradings. It has already decided to downgrade the country because of reports of several defaults by the Russian banks," sources said.

Russia is one of the top 10export destinations of the India. After witnessing a 22 per cent fall in exports to Russia in 1996-97, it picked up in 1997-98 to an annual turnover of $891 million, a growth of 10 per cent.Though exports during the current financial year is going through a rough patch with a negative growth of around 3.5 per cent in the first half and the government is pulling out all stops to boost it, ECGC does not have any plan to reconsider its decision.

"Even earlier, Russia was never too good to be in Group B. However, these groupings were never made only on economical factors. Political arrangements also played a major role and considering the Indo-Russian friendship, Russia was kept in that group," sources said.

Even under this favourable grading, ECGC was covering exports to Russia only if it was carried out within the rupee-rouble pact and if the Russian importer opened a letter of credit.

"An adherence to these parameters is not enough, as ECGC extends coverage only on a case to case basis," an industrialistadded.

Sources said that ECGC was considering to put Russia in Group D, along with Afghanistan, Algeria, Angola, Liberia, Mozambique, Pakistan, Nigeria, Rwanda, Sudan, Tanzania and Uganda among others.

The board members of ECGC, who are meeting this month, is likely to formally decide on the downgrading by the end of November.

"If downgraded by ECGC, Indian tea exporters will be the worst hit as Russia is a major market. Last year, around 50 per cent of Indian tea exports were to Russia," tea industry sources said.

Exports of Indian tea to Russia, which declined by 49 per cent in 1996-97, grew by 93 per cent in 1997-98 to finish with an annual turnover of $145 million.

Apart from tea, other major items exported to Russia in 1997-98 are drugs and pharmaceuticals worth $103 million, coffee worth $88 million, cotton yarn, fabric and made-ups worth $74 million and unmanufactured tobacco worth $56 million.