Dozens of multinational corporations have pulled out or halted operations in Russia since the February 24 invasion of Ukraine, and the process continues. With national sanctions in place, the toughest in the United States, not only companies based outside these countries, but also many others whose reputations are at risk, have pulled out.
But, there are countries like India that decided to engage Moscow and not sever ties. In this, many Indian companies and entities seek to conquer the Russian market. But, did they succeed? Not yet, because there are many challenges to doing business in a complex, integrated and interconnected global economy.
India Today spoke to a few Indian companies and financial experts in Russia and learned that apart from payment issues, banking infrastructure has come under heavy sanction, it is global logistics that has become a huge problem. But many see it as an opportunity.
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Co-owner of Imperial Tailoring Company in Russia, Indian businessman Andy Katwani said: “Russia is trying to rebuild itself. They have never been very strong in manufacturing. It is a chance for Russia to invite many Indian businessmen to come and work in Russia. Russia is ready to work with India in any business where Indians are ready to support them.
The Russian Chamber of Commerce seeks to build relationships in the pharmaceutical field, drugs that the Russians do not produce. But these opportunities are strewn with pitfalls.
Rakesh Kumar, representative of IFB Argo Industries Ltd., explained the huge vacuum created by the exit of international companies, but for their company, the biggest problem became insurance for shipments to Russia and logistics of shipments.
Rakesh, one of the major importers of seafood, especially prawns from India to Russia, said: “We are discussing and requesting the shipping company to ship the food as it is perishable but they actually avoid our product. The food product is delivered in refrigerated containers and shipping lines belonging to European and American companies. They are the main problem.
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He added that there is no insurance coverage for these shipments and payments have become an issue.
“Buyers are facing big problems sending money to us. We heard that only one bank, Sberbank, works in Delhi, but I was in St. Petersburg two days ago and the buyer said the bank is asking for a huge commission. My company said Indian banks are not willing to work this way. So we are totally stuck,” he added.
Regarding the reluctance of insurance companies, Kumar said: “Now there is a rumor and a misconception that there are problems in Russia, it is not safe and therefore Russia has been declared a zone. war because of which no insurance company is willing to insure our shipments. The ECGC is an agency of the Government of India and provides insurance to exporters to secure their payment. The ECGC will pay the exporters if the buyer refuses to pay. But even the ECGC refused to insure. Therefore, for an exporter, transporting shipments without insurance is not possible.
Financial consultant Niraj Shah says Russian corporations and big business are now looking to make India the center of big business and manufacturing to insulate their investments.
“If you’re talking about GDP, the estimate is a 10% decline. But, if you look at the country’s GDP per capita, Russians have the capacity to absorb that. People will suffer, but I see that they are ready. In the long term, they are considering Make in Russia and also Make in India projects,” said Niraj Shah.
As Indian companies eye the Russian market, the rupee-ruble transaction has not gone smoothly at all.
“It will take many more months for this to materialize. We don’t expect anything to happen so soon. Four months have passed and uncertainty remains,” Katwani said.
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