Futility of sanctions
Continuing global trade with Russia and declining popular support for sanctions expose the limitations of the ‘tool’ in the contemporary global order
Recently, Russia became the secondlargest exporter of crude oil to India, replacing Saudi Arabia. Despite the international uproar, India continued to import an increasing amount of Russian crude oil at a discounted price. India now imports about 18 per cent of its crude oil imports from Russia, up from one per cent just three months ago. In the wake of Russia’s invasion of Ukraine on February 24th, the US and European nations are scrambling to cripple the Russian economy through sanctions on its export of oil, gas, and coal in a bid to stop funding the war through their money.
India realises the futility of sanctioning a country, especially when others continue to trade. Even the US sanctions are piecemeal and tailored to its interests as it continues to import Russian uranium. About 38 per cent of its nuclear power plants are fuelled by enriched uranium from Russia and it is yet to put a ban on it.
It has also carved out a mechanism to insulate its fertiliser imports from Russia, which has a share of six per cent in potash, 13 per cent in urea and 20 per cent in diammonium phosphate. Japan also became the second-largest buyer of coal from Russia. China has now emerged as the largest importer of Russian oil and Russia has displaced Saudi Arabia as its largest supplier. If China continues to import Russian oil, any country trading with China is also indirectly funding Russian aggression in Ukraine. In the contemporary global order, where countries are crucially nested in the supply chain, sanctions face enormous limitations.
India’s Reliance and Mumbai-based Nayara Energy minted huge profits by refining discounted Russian crude oil and exporting it to Europe. This apparently has agitated the Americans and Europeans, who see it as indirect Russian oil imports. In June, the European nations announced a ban on seaborne oil imports from Russia, and some coun
Even the US sanctions are piecemeal and tailored to its interests as it continues to import Russian uranium
tries, like Poland and Germany, also committed to ending pipeline imports. Earlier, there was speculation about secondary sanctions being imposed on India’s refined product exports. But in April, White House press secretary Jen Psaki said in a press conference that energy imports from Russia were not banned and did not violate any sanctions, but urged India not to accelerate Russian imports. Since then, India’s oil imports have only increased — placing the country among the top 10 importers of Russian oil.
At present, the US and Europe are also embroiled in managing their own energy crises and the skyrocketing prices of fuel at the pumps. Public tempers are running high in the US over natural gas prices shooting over USD 5 a gallon when the mid-term elections in November are around the corner.
Americans are bitter about US gas exports to Europe when their own prices are hitting the roof. Across the Atlantic, recently, there has been a largescale protest in central London over soaring inflation and rising cost of living. Europeans are becoming critical of the US for forcing sanctions on Russia, seeing it as an opportunity to export US LNG into Europe at exorbitant prices. The Freeport outage that stopped LNG export to Europe and the consequent rise in prices are seen by many as Biden’s inability to deliver on his promise to fulfil European gas needs. The initial public support for sanctions against Russia is rapidly dwindling in both the United States and Europe.
Russia’s war on Ukraine has created an impending wheat crisis in the global market on account of soaring prices. Both these countries account for 30 per cent of the global wheat supply. Although Russian wheat and fertiliser exports are not under sanctions, the shipping and the insurance companies for these shipments are reluctant to deliver them to the international market. The US reportedly agreed to give “comfort letters” to the companies to facilitate the export of Russian wheat and fertiliser to the global market. Indonesian president Joko Widodo will soon be travelling to Russia to convince Putin to facilitate the export of Ukraine’s wheat. While Western countries urge Indonesia, which will host the G20 summit in Bali in November, not to invite Russia, the Southeast Asian country is eager to collaborate due to food security concerns. The President of Senegal and the Head of the African Union both gave a call for the lifting of sanctions on Russia.
In the face of such travesty of sanctions, India may continue with its multifaceted engagement with Russia. Besides oil and gas, India’s relations with Russia are important on several counts. India also needs coal for its steel industry and power plants. With rising temperatures and an economic recovery, power plants have come under intense pressure to generate more electricity. According to commodity intelligence firm Kpler, India’s coal import from Russia was at a 2-year high at 1.04 million tonnes in March, and Tata Steel imported 75,000 tonnes of coal in May. Besides steep discounts, payment for the Russian imports is also accepted in rupees and dirhams. The Central Banks of India and Russia are working on a payment system to continue trade unhindered outside the dollar due to western sanctions.
Russia’s role in India’s nuclear energy is equally significant. Russia has built two nuclear reactors including India’s largest one, and work on four others have begun. It also has an important role in India’s food security as it supplies potash for its fertiliser industry. Fertiliser imports from Russia have increased from USD 43 million to about USD 336 million. Further, according to SIPRI, between 2016-21, Russia supplied 49 per cent of India’s arms imports; which is equivalent to about 23 per cent of Russian arms exports. However, India’s engagement with Russia does not amount to approval of the latter’s aggression in Ukraine but is mindful of the limits of sanctions in the emerging multipolar world order.