Indian exporters of items such as machinery, equipment, chemicals and a variety of engineering goods to Russia can breathe easy with the US indicating it could give Moscow some relief from sanctions subject to negotiations on the war in Ukraine.
US Treasury Secretary Scott Bessent said on Thursday that the US could reduce the sanctions on Russia or increase them depending on how the talks on the war in Ukraine go. This follows US President Donald Trump’s statement earlier this week that he might meet Russian President Vladimir Putin this month.
“Exporters, worried about US sanctions announced on 19 Indian entities for export of dual-use goods to Russia late last year, have been in talks with the government to convince Washington to ease the scope of categorisation. A US-Russia deal at this point may help the cause greatly,” a source told businessline.
Oil imports from Russia, which were not affected by the West’s sanctions as price caps were not breached, may become smoother if the US removes its sanctions as there would be no restrictions to side-step.
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“Exports to Russia have been growing since the war with Ukraine started and India began sourcing more oil from the country. But the fear of sanctions has been looming large in many sectors. If Trump and Putin strike a deal, it will indeed be good news for Indian exporters,” an exporter of engineering products to Russia said.
Indian exports to Russia increased to $4.26 billion in FY24, compared to $3.25 billion in FY22. Imports from Russia, however, skyrocketed to $61.15 billion in FY24 from $9.86 billion in FY22 due to oil imports.
On October 30, 2024, the US announced sanctions against 400 entities and individuals from across the world for “aiding” Russia’s war against Ukraine, which included 19 private entities from India and two Indian nationals.
US government teams then visited India to caution the industry that even if components of exported items fall in the prohibited category of exports, action could be taken.
“What we told the government is that only items specifically used for defence purposes should be sanctioned. If there are items such as nuts, bolts, pipes and screws that can theoretically be used for war but have no direct relationship with the defence industry, these should be spared,” the exporter explained, adding that easing of US sanctions would be a big relief.
The EU sanctions may, however, be difficult to overcome, pointed out Biswajit Dhar, Distinguished Professor, Council for Social Development. “While things may get easier on the US front because Trump is warming up to Putin, EU sanctions may get stronger. There are indications that the EU would want stricter compliance,” he said.