India’s exports to Russia are costing businesses a fortune

India’s exports to Russia are costing businesses a fortune
Image: REUTERS/Amit Dave
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India’s trade ties with its long-time ally Russia have deepened since the Ukraine war began. So have complications due to logistical disruptions.

Western sanctions on Russia have resulted in a surge in crude oil prices and this, combined with an existing shortage of vessels, has made shipping more expensive.

Ships carrying around 3,000 containers from India to Russia are now stuck across ports in Europe and West Asia, the Mint newspaper has reported. Some shipping companies are charging the exporters extra for the return of undelivered containers.

This has compelled at least some exporters to find alternative delivery routes via land or seek new buyers in other countries. In most cases, though, the goods are being re-imported.

All this has significantly increased the cost pressures for exporters.

Redrawing alternative routes

India dispatches goods worth about $4-4.5 billion annually to the Commonwealth of Independent States (CIS) nations—Russia, Ukraine, Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.

Of this, Russia alone accounted for $2.85 billion until January this year, and Ukraine for $427 million.

With the Black Sea route now blocked, India’s using the Chinese port of Qingdao and Turkey, to reach the region, the Mint report said. Iran’s Chahbahar port is also being used—this trims the cost of India’s container transport to CIS countries by a fifth. Using the sea route to Chahbahar, the containers are then taken via road from Azerbaijan.

India’s trade with Russia post-war

About a week ago, Russia sought urgent stocks of food items from India after the West suspended its supplies. Since the Western sanctions do not cover food and pharma, it is an opportunity for India.

Both countries are now working out a payment mechanism, including a rupee-ruble arrangement and the routing of transactions through banks outside the ambit of Western sanctions.

About 60% of Indian exporters have received their payments from Russian buyers in euros in the aftermath of the Russian invasion in Ukraine. Others, too, are expected to get payments soon.