Maruti Suzuki Alto cars to be exported are parked in a holding area at Adani Ports and Special Economic Zone in Mundra, 400km from Ahmedabad. Photo: AFP / Sam Panthaky

The ongoing Russia-Ukraine crisis and the sanctions imposed by Western countries are worrying Indian firms doing business in Russia. The sanctions include curbs on some Russian banks using the Society For Worldwide Interbank Financial System (SWIFT) messaging system for international payments.

Indian exporters have pending dues, face supply chain disruptions and a tightening of norms by India’s Export Credit Guarantee Corporation for Russia.

The country’s exporters now have unpaid dues stuck in Russia and have approached the government to work out a mechanism to receive the money.

While Russian importers can transmit money in roubles, receiving them will be a challenge. Another option will be to route payments through a third country, but this will require a relaxation of certain existing rules.

Some Indian exporters fear short-term defaults by a few Russian importers due to SWIFT curbs and a falling rouble. However, there is not much concern among pharma companies and agriculture exporters as they have been kept out of SWIFT curbs.

Sending fresh consignments to Russia and Ukraine will be a concern as global shipping companies such as Ocean Network Express and Germany’s Hapag Lloyd have suspended bookings to or from Russia. Market leader Maersk is reportedly considering such a move. Freight rates to Russia have also risen.

Russia has also closed its air space to dozens of countries and this will affect manufacturers who rely on air routes to export products to Russia. Some ports in Ukraine have been damaged due to Russian air raids.

The Export Credit Guarantee Corporation, which provides credit insurance schemes, has modified the insurance category from ‘open cover’ to ‘restricted cover’ for Russia. This will mean that export credit guarantees will now be approved on a case-by-case basis and not as freely as before.

The corporation’s insurance schemes provide cover against payment dues from foreign buyers. This makes it easier for exporters to use export credit facilities from banks. The state-run corporation has an 85% share of India’s export credit insurance market.

On the imports front, India’s gems and jewelry business could be affected as Russia is a major supplier of rough diamonds, which undergo value addition and re-export from India. Though Indian firms now have enough inventory, the gems and jewelry trade could get affected if the war drags on.