EXCLUSIVE – India has ordered from sanctioned Russia parts for key sectors

Written by Aditi Shah, Aftab Ahmed and Gleb Stolyarov

NEW DELHI (Reuters) – Moscow has sent India a list of more than 500 products for possible delivery, including parts for cars, planes and trains, as sanctions strain Russia’s ability to keep vital industries going, four sources familiar with the matter said.

The list, a copy of which was seen by Reuters in New Delhi, is provisional and it is not clear how many items will eventually be exported and in what quantity, but an Indian government source said the request was unusual in its scope.

The source said that India is keen to boost trade in this way, at a time when it is trying to narrow the ballooning trade deficit with Russia. Some companies have expressed concern, however, that they may be caught in breach of Western sanctions.

An industry source in Moscow, who asked not to be named due to the sensitivity of the issue, said the Russian Ministry of Industry and Trade has asked large companies to provide them with lists of the raw materials and equipment they need.

The source added that further discussion would be required to agree on specifications and sizes and that awareness was not limited to India.

Russia’s Industry and Trade Ministry, India’s foreign and trade ministries and the prime minister’s office did not immediately respond to requests for comment.

Two Indian sources said the Russian requests were made weeks before Indian Foreign Minister Subrahmanam Jaishankar’s visit to Moscow starting on November 7. It was not immediately clear what New Delhi conveyed to Russia during the visit.

Prime Minister Narendra Modi’s government has not joined Western countries in publicly criticizing Moscow for the war in Ukraine, and has sharply increased purchases of Russian oil that has mitigated some of the effects of sanctions.

During the Moscow visit, Jaishankar said that India needs to increase exports to Russia to balance the bilateral trade which is now tilting towards Russia.

Story continues

He was accompanied on the visit by senior officials in charge of agriculture, oil, natural gas, ports, shipping, finance, chemicals, fertilizers and trade – which he said showed the importance of relations with Russia.

Russia’s struggles

Western sanctions have hampered the supply of some important products to Russia.

Airlines face an acute shortage of spare parts because almost all planes are made abroad. There is demand for auto parts as well, with global automakers leaving the market.

A source in the Russian auto sales industry said that the Ministry of Commerce has sent a list of required auto parts to the relevant ministries and state agencies in other countries, including India.

The list of items from Russia, which runs to nearly 14 pages, includes car engine parts such as pistons, oil pumps and ignition coils. Bumpers, seat belts and infotainment systems are also in demand.

For the planes and helicopters, Russia ordered 41 items including landing gear components, fuel systems, communications systems, fire extinguishing systems, life jackets and aircraft tires.

The list also included raw materials for the production of paper, paper bags, consumer packaging, and materials and equipment for the production of textiles, including yarns and dyes, according to the document seen by Reuters.

Russian metal producers, such as the nickel and palladium giant, said Western sanctions and self-punishment by some suppliers made it difficult for industrial companies to obtain imported equipment, parts, materials and technologies in 2022, challenging their development programmes.

The list includes nearly 200 mining items.

Russia has been the largest supplier of military equipment to India for decades and is the fourth largest market for Indian pharmaceutical products.

India’s first government source said that with Russian oil purchases soaring and coal and fertilizer shipments strong, India is looking for ways to rebalance trade.

India’s growing trade with Russia https://graphics.reuters.com/INDIA-RUSSIA/zgpobmlbdvd/chart.png

India’s imports from Russia increased fivefold to $29 billion between February 24 and November 20, compared to $6 billion in the same period last year. Meanwhile, the source said, exports fell to $1.9 billion from $2.4 billion.

India hopes to boost its exports to nearly $10 billion over the coming months with the list of Russian orders, according to a government source.

But some Indian companies are reluctant to export to Russia due to fears of sanctions by the West, lack of clarity on payments and challenges in securing insurance.

“There is hesitation among exporters … especially on sanctionable items,” said Ajay Sahi, director general of the Federation of Indian Export Organizations (FIEO), a body backed by India’s Ministry of Commerce.

Sahai, who is familiar with Russia’s request, said that even small and medium exporters who could meet some requests and had previously exported to Iran after Western sanctions were not enthusiastic.

Major Indian lenders are also reluctant to process direct rupee trade transactions with Russia, months after the mechanism was put in place, for fear of exposure to sanctions.

India’s imports from Russia hit an all-time high https://graphics.reuters.com/INDIA-RUSSIA/lgvdkwgkrpo/chart.png

India’s exports to Russia decline https://graphics.reuters.com/INDIA-RUSSIA/gkplwgkxdvb/chart.png

(Reporting by Manoj Kumar in New Delhi; Illustrations by Kripa Jayaram; Editing by Mike Collett-White and Louise Heavens)