Exporters weigh impact of fresh sanctions on Russia with concern | The Financial Express

Exporters weigh impact of fresh sanctions on Russia with concern

Exporters are also concerned about the sanctions potentially delaying the flow of payments to them for goods already supplied, said an official with another export promotion council.

Exporters weigh impact of fresh sanctions on Russia with concern
India’s merchandise exports to Russia crashed by 30% between April and July to $714 million, despite Moscow showing greater interest in sourcing goods from New Delhi. (IE)

Days after the US and its allies imposed fresh wide-ranging sanctions on Russia over the latter’s declared annexation of parts of Ukraine, worried Indian exporters are reaching out to the government and state-backed export promotion councils to gauge how the sanctions will hit their ability to supply goods to Moscow.

“While the latest sanctions may have limited impact on us, we have received lots of queries. Some of our members want to know who these sanctions are targeted at and how the situation will pan out,” said a senior official with one of the export promotion councils. “They are also worried about the sanctions potentially hitting their business links with some of the Russian importers. We will approach the government for more clarity on the issue,” he added.

Exporters are also concerned about the sanctions potentially delaying the flow of payments to them for goods already supplied, said an official with another export promotion council. “They have also started talking to their banks to find out the precise nature of the sanctions and whether it will hit their transactions with Russian firms,” he added.

India’s merchandise exports to Russia crashed by 30% between April and July to $714 million, despite Moscow showing greater interest in sourcing goods from New Delhi. The drop in exports is caused primarily by delayed payments in the wake of Western sanctions against key Russian financial institutions for its invasion of Ukraine and logistics challenges, according to the Federation of Indian Export Organisations (FIEO). Once the rupee settlement takes off, exports to Russia may rise to about $5 billion in FY23, against $3.3 billion a year before, said A Sakthivel, president of the FIEO, said recently.

The RBI in July notified the new mechanism to settle international trade in rupees to reduce the depreciation of the rupee against the dollar. Already, Uco Bank and Yes Bank have firmed up arrangements with Russian banks under this mechanism, and more banks are supposed to follow suit. Once this payment system is fully operationalised, it may ease exporters’ concerns about payments getting stuck.

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On September 30, the US slapped sanctions on hundreds of Russian individuals and companies, including those in Russia’s military-industrial complex and lawmakers. Russian President Vladimir Putin had on the same day declared Russian rule over 15% of the Ukraine territory occupied by Russian forces.

The US Treasury said it slapped sanctions on 14 people in Russia’s military-industrial complex, two leaders of the central bank, family members of key officials and 278 members of the legislature. The EU, too, proposed to impose more trade curbs and individual blacklistings. Russia’s state-run diamond miner Alrosa (a key supplier of rough diamonds to India) and the head of the Russian Orthodox Church, Patriarch Kirill, were put forward for blacklisting, Reuters reported, quoting unnamed sources. New import sanctions would cover steel and steel products, paper and timber, it reported.

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