Published On : 28-Feb-2022
Russia and Ukraine are mired in one of the worst armed conflicts since the second world war. As disturbed governments across Europe and the rest of the world follow the developments with keen eyes, sanctions have already been deployed on Russian banks, oligarchs and Vladimir Putin himself. Once more, the West has used the economic equivalent of heavy-duty firepower to try and quell a Russian invasion into Ukrainian sovereign territory. Russia has also been excluded from the SWIFT Payments system, a necessary function in the exchange of cash between governments and agencies. American President Joe Biden, German Chancellor Olaf Schölz, and French President Emmanuel Macron have joined world leaders in condemning the war as an atrocity by the Russian government. However, for several years, Putin has been fortifying his sanctions-prone economy and has therefore maintained a vast fund (to the tune of $600 Billion) for just such contingencies.
India, meanwhile, has given a rather muted response to the issue. They have either stayed mum altogether or spoken only in platitudes. Recently, India along with UAE and China abstained from a Security Council resolution that sought to condemn Russia for its actions.
Refugees and internally displaced persons in Ukraine have poured out into highways and trains. Neighbours Poland, Moldova and others brace to receive a huge influx of refugees.
On the first and second day of the invasion, Sensex and Nifty fell following worldwide markets. The conflict has given rise to fears of supply shortages, rise in crude oil rates and payments and movement delays. Indian exporters taking the Black Sea route have been asked to put a hold on their consignments. A similar advisory has been given to exporters and importers trading with Russia and Ukraine. Payments may not be affected to a great extent as Indian importers and exporters trade with Russia using the Indian Rupee.
Although a true impact analysis can only occur after the duration of the conflict becomes clear, it can already be predicted that traders will face a lot of difficulties. At a time when recovery from the COVID19 crisis had just started, we are facing yet another period of confusion and ambiguity.
Indian bilateral trade with Russia stands at $9.4 Billion year to date while with Ukraine it is over $2 Billion year to date. Sanctions will cripple Indian exporters and importers involved in trade in the conflict region. Besides, an oil price hike will hurt all involved, including the everyday consumer.
The Indian Export-Import community is torn at the developments. While some experts have asked traders to hold fast to their consignments and wait to see what occurs, others have advised clearing the shipments already stocked in ports or mid-voyage. Earnest appeals have also been made to the government to offset the loss to exporters with shipments that are stuck.
Russia provides a third of the natural gas consumed by Europe. Italy, Poland and Germany are only some of the countries that are heavily dependent on Russia for natural gas. The conflict might result in a global fuel crisis that will hurt businesses and households. Europeans, whose grandfathers and great-grandfathers fought in the two world wars of the 20th century, fear a snowball effect. Fears abound that Russia might not stop at Ukraine, and could pursue a diabolical plan to re-establish the erstwhile Soviet Union.
War benefits no one other than suppliers of arms and ammunition, politicians and bureaucrats. It is a most undesirable happening, and this war is surely going to hurt all of us, in one way or another. One must only hope that the governments resolve the crisis soon. Indian exporters and importers must start looking for trading opportunities with nations that will have the least burden of war. Other than that, we can all simply hope for a quick resolution between Russia and Ukraine.
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