Bypassing the ban on the import of Russian oil into Europe
Today, Russian statistics have ceased to publish operational data on foreign trade and international investment (including their geographical structure), but indirect evidence suggests that Russia’s trade and economic ties are reorienting from West to East. And under the eastern direction, we mean, first of all, China.
Beijing has said it does not support sanctions against Russia. The foreign trade turnover between China and Russia in the first two quarters of this year, as follows from Chinese statistics, increased compared to the same period last year. However, growth was driven by Russian exports to China. And at the expense of oil, solely due to its rise in price. But Russian imports from China have dipped heavily.
No one argues that we should look for various ways to maintain and increase our trade and economic relations with China, but it is not worth relying only on it. From my point of view, today the potential of such our partner as India, which is the third largest economy in the world, is clearly underutilized. Here are the IMF estimates on the share of leading countries in world GDP at the end of last year (%): China – 18.62; USA – 15.74; India – 6.90; Japan – 3.84; Germany – 3.32; Russian Federation – 3.07.
And now let’s see what was the geographical structure of Russia’s foreign trade last year. China was the leading trading partner. The foreign trade turnover between Russia and China amounted to $140.71 billion, or 17.9% of the total trade turnover of the Russian Federation. In the top ten trading partners, we see such countries as Germany (7.3%), the Netherlands (5.9%), Belarus (4.9%), the USA (4.4%), Turkey (4.2%) , South Korea (3.8%), UK (3.4%), Kazakhstan (3.3%), France (2.8%).
And India is only in 13th place (after Poland and Japan). Its trade turnover with Russia last year amounted to 13.56 billion dollars with a share of 1.7%.
There is a clear discrepancy between the level of Russian-Indian trade and the economic potential of India, moreover, a country that is our neighbor, a member of the BRICS and SCO groups. Throughout the history of Russian-Indian relations, they have been good-neighbourly, but now the West is doing everything possible to make India its ally. In 2007, an international association appeared Quadruplethe participants of which are the USA, Japan, Australia, India. At the summit Quadruple On May 24 in Tokyo, three participants in the meeting (US President Joe BidenPrime Minister of Australia Anthony AlbanesePrime Minister of Japan Fumio Kishida) gently tighten the Indian leader Narendra Modi to your company.
At the end of May, Washington made public the decision to establish Indo-Pacific economic structure (Indo-Pacific Economic Structure, IPEF). Its goals are the strengthening of global supply chains, infrastructure, decarbonization and the fight against corruption. Twelve countries became US partners in the initiative: Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam. As you can see, there is India here, but there is neither Russia nor China.
Against China, India does not even need to be forced to be friends: relations between the two countries are traditionally tense. But to force India to be friends against Russia is unlikely to succeed. New Delhi prefers military independence and, in international military-technical cooperation, is pursuing a course of maintaining a balance between the countries of the West and Russia.
According to the Federal Service for Military-Technical Cooperation of the Russian Federation, at the beginning of this year, the volume of the portfolio of orders for the supply of Russian weapons to India amounted to about $ 15 billion, and for all the years of the existence of the Russian Federation, the amount of weapons orders from India is estimated at $ 70 billion. Despite strong displeasure Washington, in 2018, a $5.43 billion deal was concluded between Moscow and New Delhi for the purchase of five S-400 anti-aircraft missile systems for the Indian Air Force. And this despite the fact that a year earlier, the US Congress passed the Countering America’s Adversaries Through Sanctions Act (CAATSA), which imposes economic sanctions on countries that buy Russian military equipment. Whether you like it or not, Washington has to turn a blind eye to India’s violation of the sanctions regime against Russia. The Americans need India as an ally.
In December 2021, Russia began deliveries of S-400 Triumph missile systems to India, negotiations were held Vladimir Putin as well as Narendra Modi. And the then Deputy Prime Minister of the Russian Federation Yuri Borisov said that India could be the first on the list of foreign countries to buy the latest S-500 missile systems.
Moscow and a number of its major trading partners (Beijing, Ankara, Tehran, etc.) have long been talking about the need to de-dollarize mutual trade settlements. And about the transition to settlements in national currencies. It is noteworthy that Russia in trade with India in this direction has moved much further than in trade with China. Thus, in Russia’s export earnings to China, the Russian ruble accounted for 8.3% in 2021, and in Russia’s export earnings to India, this figure was 53.4%. In paying for Russian imports from China, the ruble accounted for only 4.1%. And in payment for imports from India – 16.0%.
The sanctions war against Russia has dealt a blow to Russian-Indian trade. In early March, it became known that about $500 million in payments for the supply of goods between our countries was blocked by the SWIFT system. This gave impetus to a complete transition in mutual trade to national currencies and to direct settlements through Russian and Indian banks.
In the sanctions war, India was among the few countries that increased purchases of Russian goods. It is primarily oil. In May 2022, Russia became the second largest supplier of oil to India, displacing Saudi Arabia to third place, but still behind Iraq. India’s oil imports totaled 4.98 million bpd in May, the highest since December 2020.
India is also buying huge amounts of Russian coal, despite high transport costs. Purchases of coal and related products from May 27 to June 15, 2022 increased by more than six times compared to the same period a year earlier and amounted to $331 million. Over the specified period, the volume of oil trade between Russia and India increased by more than 31 times – up to USD 2.22 billion
In June 2022, Russia became the largest supplier of phosphate fertilizers to India. The Russian company PhosAgro supplies its products to India at a price of $920-925 per ton, which is lower than prices for fertilizers from China, Saudi Arabia, Morocco and Jordan
Deliveries of goods from India to Russia are also growing. After some Western companies left Russia, many Indian firms are gaining a foothold in the vacating market. First of all, these are food products and household chemicals. So far, Russian citizens are little aware of such Indian brands as vermicelli as well as Everest (range of food products from pasta to spices), Naved (flakes), solar drop (oils), baggris (cereals), Girnar (tea), Elan Vital (sweets and biscuits without sugar and gluten), etc. In the field of clothing, these are Indian brands Flying Machine, Peter England, Allen Solly, Van Heusen. They are able to replace those who left Russia Zara as well as H&M. Indian consumer products have quite European packaging and a more attractive price / quality ratio.
Well-known Indian pharmaceutical companies expect to expand their presence in the Russian market. Indian companies producing electronics and household appliances plan to enter the Russian market, among them – Micromaxsmartphone manufacturer, and Intex.
India has a huge number of small and medium-sized companies. Such companies that are not tied to the markets of the USA, Europe and other countries unfriendly to Russia. They are not afraid of secondary sanctions. This is one of the main differences between India and China, whose trade relations with Russia are in the hands of large corporations that simultaneously operate on the American and European markets.
By the way, the Indian leadership is currently working on another scheme for the purchase of Russian oil. A number of European companies have entered into oil supply agreements with Lukoil, Rosneft and other Russian oil companies. There is a nuance here. Sanctions ban the import of Russian oil not in general, but into Europe. Import contracts can be executed if supplies are redirected to other territories. The Indian authorities and business are currently negotiating with European traders on the reorientation of Russian oil to the Indian market.
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