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Trade in the times of war: Imports from Russia rise 3x since Ukraine

Of course, the growth in import value is aided by a rise in global commodity prices in recent months and a relatively low base.

Finance minister Nirmala Sitharaman recently defended the move, saying: “I will put my country’s interest first and energy security first. If oil is available and at a discount, why shouldn’t I buy it?”
Finance minister Nirmala Sitharaman recently defended the move, saying: “I will put my country’s interest first and energy security first. If oil is available and at a discount, why shouldn’t I buy it?”

India’s imports from Russia witnessed a more than three-fold jump to $4.67 billion from a year before since the Ukraine conflict began on February 24, despite pressure from Western nations. The surge in shipments from Russia is thanks to New Delhi’s efforts to strike good deals with Russian suppliers to tide over a growing shortfall of crude oil and other inputs like coal and fertilisers.

However, the country’s exports to Russia crashed 57% year-on-year to just $266 million during this period, mainly due to logistics and payment issues in the aftermath of Western sanctions on Moscow, sources familiar with the matter told FE.

Between February 24 and May 8, India’s purchases of crude oil from Russia jumped 393% to $1.86 billion, while those of petroleum products surged 175% to $560 million, said one of the sources, citing preliminary data. Similarly, imports of coal, coke and briquettes, etc, climbed 277% to $630 million, and fertiliser purchases saw a multi-fold jump to $376 million from $43 million.

Of course, the growth in import value is aided by a rise in global commodity prices in recent months and a relatively low base.

Trade sources said tidy chunks of these purchases were contracted before the war had begun in late February. They said, apart from oil and petroleum products, the surge in coal imports would continue unabated especially during the summer, as a power crisis looms over a vast swathe of the country. Three-quarters of the electricity produced in India uses coal and the country imports just under a quarter of its annual consumption of the raw material. Similarly, fertiliser imports from Russia, too, may continue, as crisis-ridden Ukraine, another supplier to India, isn’t in a position to ship out the key farm input. The government, too, is seeking to keep local supplies steady ahead of the Kharif sowing season.

Importantly, the surge in imports from Moscow suggests New Delhi, a net importer of commodities, has remained steadfast in its commitment to chart its own path despite mounting Western pressure to shun “cheap” Russian oil, especially when its critics themselves are larger buyers of Russian fossil fuels.

Finance minister Nirmala Sitharaman recently defended the move, saying: “I will put my country’s interest first and energy security first. If oil is available and at a discount, why shouldn’t I buy it?”

External affairs minister S Jaishankar, too, has decried the “campaign” against India on oil imports from Russia. India’s total oil purchases from Russia in a month would probably be less than what Europe does in an afternoon, he said recently. Russia was reportedly offering discounts of as much as $30-35 per barrel on its flagship Urals grade to woo India.

Interestingly, according to a report by Financial Times, Russia exported fossil fuels worth $63 billion in the first two months of the Ukraine conflict, with most going to the EU. The largest importers of Russian coal, oil and gas were Germany, Italy and China. Interestingly, the data compiled by the Centre for Research on Energy and Clean Air show even the US imported more fossil fuels from Russia than India during this period.

However, Indian exporters haven’t yet been able to supply much to Russia in the wake of the war, as shipping lines are reluctant to take bookings to and from Russia. This has hit the despatches of dry cargo, said trade sources. Moreover, some payments for goods supplied to Russia even before the war are still stuck, as the US and its European allies have blocked select key Russian banks from the SWIFT financial-messaging infrastructure for cross-border payment. Of course, the payment crisis has eased considerably in recent weeks and several Russian firms have evinced greater interest in sourcing more from India. However, given the supply-chain disruptions, many domestic exporters still remain jittery and are awaiting the war to be over.

Exports of drug formulations and biologicals dropped 41% to $60 million, while those of bulk drugs and intermediates eased 19% to $17 million between February 24 and May 8. Marine product exports collapsed 91% to just $2 million; telecom instrument despatches dropped 20% to $32 million; and iron & steel shipments plunged 56% to $14 million.

India’s exports to Russia hit $3.3 billion in FY22, while its imports stood at $9.79 billion, said one of the sources. New Delhi’s trade deficit is all set to widen in the current fiscal.

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