KOLKATA: Exporters on Monday said they will face more difficulties for their shipments to Russia with a decision to exclude selected Russian banks from the global financial system SWIFT as the move would hamper direct payments for goods shipped out to the CIS country.
The US along with its key allies, including the European Union and the UK, have decided to disconnect key sanctioned Russian banks from the Society for Worldwide Interbank Financial Telecommunication in response to Moscow’s invasion of Ukraine.
Exporting community also hoped that if sanctions, including the one on the banking network, continue, the central government may open a rupee payment channel as done in the case of Iran in the past.
Export Credit Guarantee Corporation has also decided to withdraw coverage for shipments to Russia with effect from February 25, which is a huge setback for exporters.
“Exclusion of selected Russian banks from SWIFT will surely act as a deterrent for the smooth functioning of the payment system and Indian exporting community is apprehended to face uncertainty or at least a deferral on payments for exports. This may again discourage them from executing further orders from Russia and India’s exports to the country may decline substantially going forward,” EEPC India chairman Mahesh Desai told PTI.
Federation of Indian Export Organisations also expressed apprehension and said payments to exporters will get stuck for the shipments that have already been dispatched and they will hold on to new orders until a fresh payment mechanism is not in place.
“Disconnecting Russian banks from the SWIFT network is having a major impact. However, the Indian government will surely do something to overcome the problem and a rupee payment mechanism may be put in place with what we have seen in the case of Iran in the past,” FIEO chairman (east) Sushil Patwari said.
He also said, “The oil import payments and receivables for exports may be in rupee terms as US dollar and Euro payment settlements will not be possible once excluded from SWIFT.”
Based in Belgium, the SWIFT system is considered central to the smooth functioning of global finances and Russia’s exclusion from it would hit the country hard.
Tea sector veteran C S Bedi said the majority of exports of the commodity to Russian destinations is over, so “no major impact may be faced now” but if payments are due then such a move by the Western countries may pose challenges.
“The immediate concern is what will happen to the receivables which are due from Russian importers,” Nipha Exports director Rakesh Shah said.
India is a leading supplier of various goods to Russia with around USD 3 billion of merchandise exports, Desai said.
Engineering exports to the country are likely to go up to nearly USD 1 billion this fiscal, he added.