India-Russia Bilateral Trade Hits All-Time High amid Ukraine Sanctions

Narendra Modi, India's prime minister, right, and Vladimir Putin, Russia's president, pose
T. Narayan/Bloomberg via Getty Images

Russia’s trade volume with India is exploding, even as India’s Western allies slap sanctions on Russia for its invasion of Ukraine. India’s greatly increased imports of Russian oil and fertilizer are key elements of the trade boom.

The Indian Express on Friday laid out some remarkable numbers:

Fueled by a surge in import of oil and fertilizers, India’s bilateral trade with Russia has soared to an all-time high of $18,229.03 million in just five months (April-August) of this financial year (2022-23), according to the latest data available with the Department of Commerce.

In contrast, the total annual bilateral trade between the two countries stood at $13,124.68 million in 2021-22, and $8,141.26 million in 2020-21. Pre-Covid, it was $10,110.68 million in 2019-20, $8,229.91 million in 2018-19, and $10,686.85 million in 2017-18.

With the sharp spike in trade, Russia has now become India’s seventh biggest trading partner — up from its 25th position last year. The US ($57,632.37 million), China ($50,792.83 million), UAE ($36,820.33 million), Saudi Arabia ($23,995 million), Iraq ($18,822.27 million) and Indonesia ($18,816.58 million) were the six countries which recorded higher volumes of trade with India during the first five months of 2022-23.

Fertilizer and fuel products comprised 91 percent of India’s surging imports from Russia, while India’s exports to Russia are dominated by pharmaceuticals and organic chemicals.

In early October, the Economic Times of India quoted analysts who said Russian oil accounted for just one percent of India’s oil before the invasion of Ukraine, in part because high shipping cost made it “uncompetitive” with other sources. Once the invasion was launched and heavily-sanctioned Russia began offering deep discounts on oil, India’s imports surged to 21 percent.

“Rising Russian imports have meant a loss of market share for other key exporters such as the U.S., Iraq and the UAE. In September, Saudi Arabia was the top supplier to India while Iraq and the UAE were the third and fourth largest respectively. The U.S., the fifth largest supplier, now has about 4% of the Indian market, down from 10% a year earlier,” the Economic Times noted.

In September, the State Bank of India announced a plan to allow Indian customers to conduct trade with Russia in rupees, rather than U.S. dollars or euros. 

The system was supposed to make it easier for Indian firms to avoid getting hit by sanctions while doing business with Russia, but India’s biggest lenders are reportedly nervous about using the rupee system and risking “major business and reputational loss” if their transactions are scrutinized for sanctions evasion. Some Indian bankers also lamented the difficulty of matching rupees with the wildly unstable Russian ruble.

On the other hand, some third parties have expressed interest in using Indian rupees to avoid sanctions while trading with Russia and Iran, notably including the United Arab Emirates (UAE).


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