The Russia-Ukraine Crisis: Acts and Impact on India

The Russia-Ukraine crisis is likely to impact India in many ways, including the economy which is just emerging from the effects of the COVID-19 pandemic, besides putting pressure on the Indian government to balance its relations with Russia and the US.

Outline:

• Approximately 20000 Indian nationals are stuck in Ukraine, out of that 4000 have been evacuated
• Raise oil prices- oil jumped to a 7-year high.
• As per BP data, the country pumped about 639 billion m³ of natural gas in 2021, which was nearly 17% of the global production of 3.854 trillion m³. 
• Fall in the stock market.
• After US sanctions, India has to take a side, in which Indo-Pacific shall be an issue for India and the US too.
• President has already under pressure regarding the purchase of the S-400.
• India’s trade with the US and its allies – $300 bn (maybe even more)
• India’s trade with Russia – $10 bn (maybe even less)

Condition as of Now

• Russia claimed on Sunday that two big cities in the south and southeast of Ukraine have been besieged, – AFP.
• Ukraine is continuing to fight against the Russian invasion as the military operation announced by President Vladimir Putin entered day four.
• On Sun morning, massive explosions rocked south of Kyiv with the Ukrainian government saying that one such explosion was near the Zhuliany airport and another one at an oil depot.
• Nearly 200 civilians in Ukraine have died so far and more than 150,000 civilians have fled to neighboring countries including Poland, Moldova.
• China postpones evacuation of citizens from Ukraine: China’s envoy to Ukraine said that evacuation of Chinese nationals has been postponed as current conditions were too unsafe.
• Former Japanese Prime Minister Shinzo Abe today (Sun) asked the US to ditch its strategic ambiguity over Taiwan and make it clear that it would defend Taipei from a Chinese invasion.
• Former Japanese Prime Minister Shinzo Abe today asked the US to ditch its strategic ambiguity over Taiwan and make it clear that it would defend Taipei from a Chinese invasion.
• Meanwhile, the US, UK, and the EU will sanction the Russian central bank and block the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
• US officials said on Sat that previously announced sanctions on Russia already had an impact, bringing the currency to its lowest level against the dollar in history and giving its stock market the worst week on record.
• Russia’s decision to recognize two separatist regions in the East of Ukraine has escalated the crisis between the two countries, which seemed to ease last week.
• The US has said that Russia’s movement into the East of Ukraine is the beginning of an invasion.
• NATO, echoing the US’ claims, also said that there is every indication that Russia is planning a full-scale attack on Ukraine.
• Moscow’s move in East Ukraine has prompted Europe to impose sanctions against Russia. Foreign minister Sergei Lavrov has said that Russia is used to all such sanctions as they are imposed with or without reason.
• Meanwhile, Ukrainian President Volodymyr Zelenskyyon has demanded an immediate halt to the Nord Stream 2 project.
• German Chancellor Olaf Scholz has already announced that his govt is suspending the project with Russia.
• US Secretary of State Antony Blinken said Tue he had canceled a planned meeting with Russian Foreign minister Sergei Lavrov later this week, as Russia had started an invasion of Ukraine.

Engagements during the Crisis: Neutral

Dialogue, diplomacy best way forward to defuse Ukraine crisis: External Affairs Minister S Jaishankar on Thu night held separate telephonic conversations with his Russian counterpart Sergey Lavrov and US Secretary of State Antony Blinken, insisting that dialogue and diplomacy are the best way forward to defuse the Ukraine crisis.

India’s stand on Ukraine unclear as Russia finds Modi ‘appreciative’, US says not fully resolved- India’s stand on the Russia-Ukraine crisis continued to remain elusive, with Washington saying that the matter was still unresolved, while the Kremlin claimed that during a phone call with Russian President Vladimir Putin, Prime Minister Narendra Modi had been “appreciative” of his “special military operation”.

India in ‘close touch’ with all concerned: FS Shringla on Ukraine crisis-Hours after Ukraine came under a large-scale Russian attack, India on Thu underlined the need for dialogue among the key parties and said that it will be more than happy to facilitate that engagement. Foreign Secretary Harsh Vardhan Shringla said at a media briefing that India has been in “close touch” with all concerned including the US, Russia, and European Union as it has a “stake” in the region.

Evacuation of Indian National:

Ukraine Railways is additionally organizing emergency trains at no cost, first, come basis from Kyiv. The schedule can be found at train stations. Indian diaspora is advised to move away from conflict zones to the Western region subject to the security situation and the extant regulations. 5^th flight from Bucharest to Delhi arrives. Under Operation Ganga, the second flight from Bucharest has taken off for Delhi carrying 250 Indian nationals, EAM Dr. S Jaishankar said on Sat. Embassy of India, Kyiv, has started the evacuation of stranded Indian Nationals from Ukraine. The Flight from Budapest to New Delhi carrying stranded Indian Nationals from Ukraine is expected to arrive at IGI Airport, New Delhi at 7:45 am on Feb 27, 2022. The first evacuation flight of Air India, AIC 1944 touched down at the Chhatrapati Shivaji Maharaj International Airport in Mumbai at 7.50 pm. There are 20000 Indin nationals are stuck in Ukraine.

Impact on India

There is no direct impact of the Russia-Ukraine war on India in terms of bilateral trade, but a surge in oil prices poses considerable risk to the economy, an analyst report said on Friday. International oil prices, which have surged past $100 per barrel, “pose risks to external stability and currency movement”, a Bank of Baroda Economics Research report said. So far, the US has not cut off Russia from the global payment system.

India imports more than 80 percent of its total oil requirement and is the world’s third-largest importer of crude oil. In FY21, India’s oil imports totaled $82.7 billion. In the current fiscal, oil imports have risen to $125.5 billion driven in part by economic recovery as well as higher oil prices. However, with oil prices now hovering at a near 8-year high, oil imports are likely to be higher.

Impact on Indian exports

Russia is India’s 25^th largest trading partner with exports of $2.5 billion and imports of $6.9 billion in the first nine months of FY2022. India’s key exports to Russia include mobile phones and pharmaceuticals while India’s key imports from Russia are crude oil, coal, and diamonds. Tea is a major export item from India. Sanctions on Russian exports including crude oil are seen as unlikely by exports as crude oil prices are already at an eight-year high and crossed the $100 per barrel threshold on Thu.

India’s exports to Ukraine were about $372 million in the April-Dec period led by pharmaceuticals and mobile phones, while imports worth about $2.0 billion are dominated by sunflower oil and urea. Together exports to both countries accounted for under 1% of India’s exports in the first 3 quarters of this fiscal.

Impact on India’s Energy Strategy

Crude oil prices are now hovering at around a 7-year high, with Brent oil prices surging above $100 a barrel for the first time since 2014. It may be noted that Russia is a key supplier of energy globally. Europe relies on Russia for about a quarter of its oil supplies and a third of its gas.

While the economic relationship has waned, there is a significant foreign investment both ways between India and Russia, in some of each other’s petroleum sector assets. Since that is an old investment, there may not be any immediate impact as the sanctions being imposed in reaction to the latest offensive are targeting new investment – no new investments, trade, no new Russian bonds in the western stock markets, and so on. The western countries haven’t targeted old investment – and it’s difficult to do that.

India accounts for a negligible (less than 1%) share of Russia’s crude oil exports, which is partly because most Indian refineries cannot process the heavy crudes that Russia exports & the transportation costs from Russia to India.

India And The Indian Economy

The situation in eastern Ukraine is in danger of spiraling into a major crisis, TS Tirumurti, Ambassador of India to the United Nations, said at the UNSC meeting on Thu. Legitimate security interests of all parties should be fully taken into account, he said. However, a surge in crude oil prices and the prospect of a recession in Europe in the event of a full-blown Ukraine war and stricter sanctions on Russia don’t augur well for the Indian economy, ICICI Securities said in a recent research report. India is a large importer of crude oil. As such, the first point of impact of higher crude oil prices is the current account. Rising crude prices come at a time when the current account deficit has already widened. However, India today has far greater protection against any volatility in its balance of payments than in the past.

The rupee too has come under pressure due to higher oil prices, which lead to a burgeoning trade deficit and hence adversely impact the external stability. Crude oil-related products carry a weight of 7.3% in the wholesale price inflation (WPI) basket. Hence the direct impact of a 10% increase in oil prices is estimated to be around 0.7 percent on WPI. Adding the indirect impact, the overall effect can be around a 1% increase in WPI inflation.

The impact on CPI inflation will be both direct and indirect — 0.15% increase in retail inflation (CPI) because of a 10 percent increase in oil prices and 0.25-0.35% due to indirect impact on supply chains and price push on other commodities and services. The report said Russia is not a major trade partner for India. In FY21, India’s exports to Russia were $2.7 billion or 0.9% of India’s total exports. These are mainly pharmaceuticals and electrical machinery.

Ukraine crisis is India’s problem too, not just big powers’ fight for influence

This crisis provides our Government an opportunity to focus on pursuing our national interest to the full. Instead of our wishy-washy neutral stand, we must throw our full weight behind the side that we perceive will help us to effectively counter China’s aggressive designs. Otherwise, as in the past, we will once again be on our own with only token assistance being offered. The brutal truth is morals and values count for little and national interest is paramount. (ORF)