Enquiries from Russia put exporters in a spot

Indian exporters are getting lots of enquiries from Russian entities for supply of various types of goods. Many of them, especially the smaller exporters, are not sure whether they can respond in confidence that they can execute the orders and get the payments.

Before invading Ukraine, Russia — mainly an exporter of military hardware and commodities like oil, gas, coal, and some metals — relied on imports from Europe and North America to meet most of its other requirements. After the invasion of Ukraine and the stringent economic sanctions imposed by the United States and its allies, the position has changed dramatically. The Russians are now not only trying to ramp up domestic manufacturing but also looking at other sources of supplies, especially in Asia, for meeting their requirements. That is the reason for the spurt in enquiries from Russian entities.

The decision of the Russian entities to look for sources of supply away from Europe and North America can have far-reaching implications. The Indian exporters see this preference of the Russian entities to diversify their supply sources as an opportunity to establish their foothold in the Russian markets. Russia’s economy is about $1.6 trillion and its per capita income is over $10,000. So, the spending power of the Russian consumers is greater than that of the people in many other countries. Sooner or later, the war and the economic sanctions will end and by the time that happens, the Indian producers can have a reasonable presence in the Russian markets and be in a better position to exploit the opportunities to increase their exports.

The immediate challenge of the Indian exporters is to find shipping lines that will take their cargo to Russia. Recent media reports say several consignments of Indian goods bound for many destinations in Russia are stuck in various European and West Asian ports. Many exporters are trying to bring back the goods to India or attempting to divert the goods to buyers in other destinations. They are facing additional costs as the ship operators are demanding demurrage and detention charges before the containers are re-loaded to other vessels.

Media reports say exports of non-sanctioned items like food, medicines, etc. to Russia have resumed. However, exporters find that major shipping lines like Maersk and CMA-CGM are not accepting cargo to Russia. Even the responses from the freight forwarders to the enquiries regarding sailings to Russia do not help them take a decision quickly. There is uncertainty regarding the accuracy of the information they get.

Another problem relates to getting payments from the buyers. Again, media reports say the exporters are able to get payments for shipments made before the hostilities began, through Russian banks that are not in the sanctions list. However, information available from local banks on getting around the sanctions is not good enough for the exporters to make a decision on whether to respond to the enquiries from Russian buyers.

The Director General of Foreign Trade (DGFT) has set up a ‘Russia-Ukraine help desk’ to resolve the issues faced by the exporters. A weekly meeting with concerned exporters/importers/other stakeholders is also being held by the DGFT. It would help if the DGFT uploads the minutes of these meetings and also, authentic information on shipping and payments channels.

email: tncrajagopalan@gmail.com