Ukraine crisis will hit exports worth $500m to Russia, CIS

Exporters and manufacturers are expecting further hike in freight rates, which had gone up during the pandemic due to port closures. Container rates are currently 81per cent higher than they were a year ago. 

India exports goods worth $2.5 billion annually to Russia and another $1.5 billion to CIS (Commonwealth of Independent States) countries, according to industry figures.

Exporters and manufacturers are expecting further hike in freight rates, which had gone up during the pandemic due to port closures. Container rates are currently 81per cent higher than they were a year ago. 

“Based on the near-term commercial outlook, it has been decided to modify the country risk classification of Russia under the short-term and medium-and-long term with effect from February 25,” Export Credit Guarantee Corp. (ECGC) said in a recent release. ECGC withdrew cover on shipments to Russia in the wake of the Ukraine crisis.

Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO) was quoted saying that ECGC covered 15per cent of shipments.

With the US Office of Foreign Assets Control (OFAC) imposing sanctions on Russian banks – in fact, France, Germany and the UK have initiated similar action – making transactions in dollars, euros and pounds has become impossible for trade with Russia.

Sahai also said that Russian importers had agreed to transact in roubles but there was a problem since it was not a widely traded currency. “We don’t enjoy many incentives from the Indian government such as duty drawbacks etc. that we enjoy on the dollar,” said Sahai.

However, what was important was that exports in segments such as pharma, which constitutes the biggest chunk of India’s exports to Russia, agriculture and energy have been exempted by the OFAC.

The Ukraine crisis notwithstanding, India’s export target of $650 billion for this financial year would probably be achieved, according to Piyush Goyal, Commerce and Industry Minister.

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