The west has not sanctioned all Russian banks, allowing free access to settle payments. Furthermore, Indian exporters needn’t worry as the US and Europe issue sanctions against the country.
Moreover, India has a trade deficit vis-à-vis Russia of $4.34 billion up to December. Meaning Indian entities owe Russia dollars in net.
As a result of western sanctions, Russia may not settle payments. Russia is bound to turn to those who owe money to Russian entities in such a case.
Indian exporters needn’t worry about payment for their Russian exports
Russia has free access to some Russian banks to settle payments on New York-based dollar networks.
Furthermore, according to the Economist Intelligence Unit, Russia has a vigorous current account surplus amounting to 7.4% of GDP.
Moreover, Russia has no shortage of dollars, with which they can settle payments.
As per the Russian central bank, Russian international reserves stood at $630.2 billion on January 31, 2022.
In addition, the foreign exchange reserves account for $498 billion. The remainder comprises Special Drawing Rights, gold, and reserve position at the IMF.
Sanctions issued against Russia
Europe depends on Russia for nearly 40% of its natural gas needs.
Therefore, Europe is not looking forward to imposing sanctions against Russia to avoid any hindrance.
Moreover, Europe not sanctioning Russia means that Russian banks would remain in the world’s dollar networks.
European banks would find it difficult to pay for Russian gas if they faced something similar to the Iranian sanction.
Effects of various sanctions on Russia
While Europe has not issued sanctions, there would be sanctions against Russia, a bar on the Russian government raising debt on European capital markets, against powerful Russians, and some Russian banks.
However, as some Russian banks can receive dollar payments, they can settle Indian exporters’ costs.
Furthermore, Russia can continue the export of gas and Indian exporters can continue to export to Russia.
Many believe that the Europeans overlook Ukraine’s desire to join the North Atlantic Treaty Organisation.
Also, according to the New York Times, The Dutch are persuading to keep diamonds out of the sanction. At the same time, the Italians are lobbying to keep out luxury goods.
Europe sanctions may raise oil prices
If Europe issues sanctions against Russia, gas and oil prices could severely soar.
Furthermore, the Gilets Juanes (Yellow Vests) protests of 2018 due to high taxes imposed by French President Emmanuel Macron on petrol and diesel.
Moreover, many wonder if President Macron will issue the sanctions, close to the French presidential elections in April, rising oil and gas prices.
Additionally, the question is if the sanctions against Russia could set off Gilets Juanes on the warpath again.
As the Ukraine-Russian crisis escalates, various countries would issue sanctions against Russia. These sanctions would cut off Russia from the rest of the world’s economy.
Nevertheless, Indian exporters needn’t worry and can continue exporting to Russia as before.