Macro Economy

Ukraine-Russia turmoil may hit India’s trade with CIS

Amiti Sen New Delhi | Updated on March 04, 2014

Prolonged tension, sealing of borders could block export shipments

India’s trade with CIS countries could get hit if the on-going tension between Ukraine and Russia escalates and stretches over a longer period of time.

Ukraine is India’s second largest trading partner in the region after Russia and is also the gateway for its exports to a number of other CIS countries.

“If rising tension leads to the Ukranian border getting sealed, shipments will get stuck,” a Commerce Ministry official told Business Line.

“Till now business to Ukraine and other CIS countries has not faced any problems. But it is a fast developing situation. If things worsen, trade would get hit,” the official said.

Ukraine is an important supplier of edible oil, petroleum products and fertiliser to India and a growing market for India’s pharmaceutical industry.

India’s annual trade with Ukraine in 2012-13 was valued at $3.15 billion while its trade with all CIS countries was worth $11.5 billion.

The Commerce Ministry has identified CIS as an important region for market diversification to reduce the country’s dependence on traditional markets such as the US and the EU. Indian exporters are offered incentives to export to countries in the region. Exporters confirm that shipments have been moving smoothly across Ukraine despite the political upheaval in the country over the last few weeks. But with Russia readying to send its troops across the border into Ukraine, things may change.

“We have not yet received any intimation about traders facing problems in Ukraine. But if the tension continues and escalates, business will certainly get hit. We are hoping that things will get sorted out soon,” said Ajay Sahai, Director-General, Federation of Indian Export Organisations (FIEO). Things can take a turn for the worse if Russia decides to attack Ukraine, which overthrew its pro-Russian President Viktor Yanukovych last month.

The ouster followed several months of protests by the country’s youth that was disappointed with the President’s decision not to join the European Union.

Tensions between Yanukovych, who has reportedly taken refuge in Russia, and the protestors that include Opposition members, escalated after he introduced a number of anti-protest laws and used violence leading to the death of many citizens.

Published on March 03, 2014

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