The Federation of Indian Export Organisations (FIEO) has asked about two dozen export promotion councils under it not to unduly panic about the impact of Russia’s military operations in Ukraine, saying outbound shipments of farm, pharmaceutical and petroleum products so far remain out of the ambit of the American sanctions on Moscow.
FIEO’s internal letter on February 27, reviewed by FE, comes amid mounting concerns about the fate of India’s trade with Russia in light of the sanctions imposed on Moscow by the Office of Foreign Assets Control (OFAC), a financial intelligence and enforcement agency of the US Treasury Department. The OFAC has, over the past few days, announced a raft of sanctions on select Russian individuals and entities in response to the Russian attack on Ukraine.
Farm products made up 15% of India’s $2.55-billion exports to Russia in the first three quarters of this fiscal, while pharmaceutical products accounted for 15%. Of course, India doesn’t ship out petroleum products to Russia; instead over a half of its $7-billion imports from Moscow until December this fiscal comprised petroleum products.
The apex exporters’ body has asked the councils to sensitise their members about various exemptions and guidelines that the OFAC has specified and the eight general licences authorising certain transactions.
As such, analysts have pointed out that since India’s trade with Russia makes up only a tiny part of its overall overseas despatches, the direct impact of the crisis on New Delhi will be very limited. Russia accounted for only 0.8% of India’s exports and 1.6% of its imports between April and December this fiscal. Of course, as crude oil prices rise, the indirect impact of the Ukraine crisis on Indian trade and economy would be higher.
“To ensure that sanctions and prohibitions on Russia have an impact on the intended targets and to minimise unintended consequences on third parties, the OFAC has also issued several general licenses in connection with these actions,” FIEO said.
“In particular, payments for energy are from production to consumption. The sanctions and license package has been constructed to account for the challenges high energy prices pose to average citizens and doesn’t prevent banks from processing payments for them,” it added.
According to FIEO, specifically, the OFAC has issued eight general licenses authorising certain transactions related to international organisations and entities; agricultural and medical commodities and the Covid-19 pandemic; overflight and emergency landings; energy; dealings in certain debt or equity; derivative contracts; the wind-down of transactions involving certain blocked persons; and the rejection of transactions involving certain blocked persons.
