Ukraine & Russia together account for close to 90% of India’s Sunflower Oil imports. With a 56% gap between edible oil demand & domestic production, India could feel the pinch with reduced Sunflower Oil imports if the Russia-Ukraine conflict is long drawn.
On 24 February 2022, Russia launched a large-scale assault on Ukraine, escalating the existing hostility between the two neighbouring countries. The ongoing military conflict between the two countries has created a wave of uncertainty on various aspects including diplomatic relations, trade, travel etc.
In the recent vote called by the United Nations Security Council on Russia’s aggression on Ukraine, India has abstained from the voting. The erstwhile USSR and the successor state of Russia have been key allies of India in many areas.
With the conflict raging between these two former Soviet republics, it is bound to have an impact on their trade with India. In this story, we look at the trends in India’s trade with Russia & Ukraine and assess any impact the conflict could have. The data from the Department of Commerce’s Export-Import databank is considered for the story.
Trade with Russia has been fluctuating over the years
The volume of India’s trade with Russia has increased over the years, largely due to the increased imports. The deficit in trade has been widening over the years, with the increase in the volume of imports and exports to Russia not increasing at the same rate.
The data for imports from Russia indicate that there is no definitive trend in the value of imports over the years, with periodic increases followed by a decline. In 2011-12, the value of imports from Russia was USD 4.76 billion, which fell in the following two years, followed by an increasing trend during 2014-18. After a peak of USD 8.57 billion worth of imports in 2017-18, the volume of imports has been fluctuating, increasing in one year followed by a decline in the following year.
In 2020-21, the value of imports was USD 5.4 billion but during 2021-22, the value of imports is already around USD 6.89 billion in the first three quarters (April-December 2021).
The same can be said about exports to Russia, with an increase in the volume of exports followed by a decline. As noted earlier, the volume of exports is significantly lower than imports and the gap has been widening in general.
Increased volume of Petroleum (Crude) imports from Russia
The fluctuation in the value of imports over the past few years can be largely attributed to the change in the import volume patterns of certain commodities. In 2020-21, the commodity with the greatest import value from Russia was Petroleum (Crude) at USD 944 million. The same is the case during the first three quarters of 2021-22, with the value of Petroleum (Crude) imports already reaching USD 1.94 billion. The fall in 2020-21, is in line with the overall trend of fall in imports due to the pandemic.
Since 2016-17, there is a marked increase in the import of Petroleum (Crude) from Russia. Prior to that, the volume has been much lower. Hence, the overall increase in the value of imports from Russia can be largely attributed to this increase in the import of Petroleum (Crude). However, the import volume of Petroleum (Crude) from Russia is only about 2% of India’s overall import volume of Petroleum (Crude) by value.
Unworked Diamond is another commodity with high import volume from Russia. Although Russia still ranks among the top countries from which they are imported, the volume has considerably reduced in recent years. The import value of Unworked diamonds from UAE & Belgium has also largely remained stable. This is largely due to a fall in overall import volumes of this commodity in recent years.
The value of imports of other commodities like Unwrought Silver, Potassium Chloride, non-alloyed Nickel, Copper wire, etc. has also reduced. In contrast, import volumes of Sunflower Oil & Unpulverized Coal have increased in recent years. India’s imports of unpulverized coal from Russia account for about 1/5th of the total import of the commodity and rank only next to Australia. In the case of Sunflower Oil, the import volumes from Russia are the second highest with Russian imports accounting for around 1/10th of the total imports.
Overall, it can be stated that the import of Petroleum (Crude) dominated the imports from Russia in recent years with a fall in import volumes of most of the other traditional commodities.
On the other hand, the exports to Russia constitute only around 1% of India’s total exports. While there have been different products which topped the exports from India in different years, products including “Boneless Bovine Meat”, “Shrimp”, “Tea- Black Leaf”, have been among the major export commodities. Among these, Russia is the prominent export partner of “Tea-Black Leaf”
A decline in the Imports from Ukraine in recent years
India’s trade value with Ukraine is on the lower side. The overall value of Imports from Ukraine, pre-pandemic i.e., in 2019-20, were USD 2.06 billion which was about 0.4% of India’s overall Imports. In the case of exports, the share of India’s exports to Ukraine constituted only about 0.14% of India’s total exports.
The trend over the years indicates a general decline in the value of overall trade. This decline has been steeper in the case of imports from Ukraine. The value of imports from Ukraine was around USD 2.48 billion in 2016-17. In 2020-21, this reduced to USD 2.14 billion. In the first nine months of 2021-22, the value of imports from Ukraine stands at USD 1.98 billion.
Crude Sunflower Oil is the major import commodity from Ukraine
While the value of imports from Ukraine is negligible compared to India’s overall imports, Ukraine is India’s primary trade partner for Crude Sunflower Oil. In 2020-21, Crude Sunflower Oil constituted around 74% of the total imports from Ukraine. Over the years, this product has remained the major import commodity from Ukraine.
At the beginning of the decade, other commodities like Urea, Ammonia, etc. also formed a sizeable part of the imports from Ukraine. However, their value has decreased over the years.
Apart from Sunflower oil being the major import commodity from Ukraine, the country also happens to be India’s main source of Sunflower oil imports, accounting for more than 80% of India’s overall import of Sunflower oil over the last 10 years. After Ukraine, Russia ranks second in the source of imports for Sunflower oil as highlighted earlier.
The share of Ukraine in India’s overall import of Sunflower oil has reduced with the emergence of Russia & Argentina, but Ukraine still remains the major import partner for this commodity.
While the overall impact on trade may be minimal, the impact of reduced Sunflower oil imports could be considerable
As the numbers indicate, the share of overall trade volumes with Russia and Ukraine is not as high to significantly impact India’s overall trade. However, the trade of specific products holds significance.
As already highlighted, there is an increase in the import volume of Petroleum (Crude) from Russia in recent years. Any impact on trade routes & economic sanctions on Russia could significantly affect this.
Equally if not more significant could be the impact on the import of Sunflower oil. Ukraine & Russia account for 80-90 % of India’s Crude Sunflower oil imports in recent years.
In a response provided in Lok Sabha in December 2021, the Government stated that there is a 56% gap in between the demand for edible oils and domestic production, which is met through imports. As per the data provided in the same answer, in the last three years (2018-21), Crude Sunflower Oil imports constituted around 16% of all edible oil imports, highlighting the role of Sunflower Oil imports.
In 2013-14 also, Russia & Ukraine engaged in an armed conflict during Feb-March 2014. The data for this period shows that there is a significant fall in the value of Crude Sunflower Oil imports during the conflict. While the dependency on Ukraine has come down over the years, it is largely due to increasing in imports from Russia. With both the countries involved in the current conflict and significant economic sanctions on Russia, India could feel the pinch as far as Sunflower oil imports are considered. The situation could worsen if the conflict continues for a long period.
Featured Image: India’s Trade with Russia & Ukraine