Russia’s Economic Future and Opportunities to India and China

From the very beginning of Russia-Ukraine tensions, US and European Union were confidently saying that Russia would be facing strong repurcussions of any its invading deeds to Ukraine and after starting of military operations by Russian forces through land, air and water and grilling Ukraine from all directions, the former group is still on the same page rather being present on the ground as committed before. US with European countries and many more have covered an ending list of sanctions over economic assets of Russia and hoping to destroy the red communist giant through Economy.

Cycle of sanctions

But will these sanctions really affect Russia’s economy on the long run? It seems the same cycle of sanctions and condemnation is being repeated by the west as they had in the response to the annexation of Crimea by the Russian federation. Some governments and international organisation led by the United States and European Union imposed sanctions on Russian individuals and businesses. In all, three types of sanctions were imposed : ban on provisions of technology for oil and gas exploration, ban on provisions of credits to Russian oil companies and state banks, travel restrictions on the influential Russian citizens close to Russian premier Putin and involved in Crimean annexation. All those sanctions contributed to the collapse of the Russian ruble and the Russian financial crises.

Sanctions on Russia had hit the Russian economy badly. Since 2014, it has grown by an average of 0.3% per year which was too less than the global average growth of 2.3% per year. However, these sanctions also caused economic damage to a number of European countries with toal losses estimated at €100 billion as of 2015. With the time European countries and Russia opened trade of oil and natural gas, military equipment, space technology etc. which indicate how important Russia becomes for European countries since they are highly dependent on Russia’s natural gas and crude oil that’s why sanctions are exempted from Russian oil and naturals gas which costs way much less as compared to US prices. So might be there harsh steps affect Russia on short terms but ultimately these countries would run back to Russia as every country looks for its interests only eventually.

The EU, US and UK among other countries have imposed several economic and political sanctions against Russia after Vladimir Putin launched special military operations in Ukraine last week which include freezing of the assets of Russia’s central bank, limiting its ability to access $630 billion in international dollar reserves. The countries have also agreed to remove selected Russian banks from SWIFT (Society for Worldwide Interbanking Financial Telecommunications) messaging system which enables the smooth money transfer of money across border. Following the ban from SWIFT, Russian ruble collapsed to an all time low against the US dollar and the country’s central bank had to come to its rescue. EU has banned Russian planes from all EU airspace and airports and has stopped shares of Russian companies being listed on EU stock exchanges. Germany suspended the certification process for the Nord Stream 2 natural gas pipeline which is directly linked to Russian gas from Europe through Germany. Taiwan is being expected to stop exporting semiconductors to Russia which could choke Russian industries.

Opportunities to India and China

Ongoing escalation of Russia and Ukraine war and adopted dormant nature of US, EU and NATO transparently showing that the world order is moving towards a change. A lot of changes in the world dynamics proceeding towards shuffling of power in terms of Economy, politics, military etc. From last some years, Asia has been grown as a big market especially highlighted India and China which expanding their area of interest exponentially and after abstentions of many Asian countries including India and China over resolutions on de-escalation of Russia-Ukraine war passed in UNSC in 1st week of march clearly showed that how important Russia is for India and China to maintain their strong hold militarily for deterrent in near future.

However from India’s point of view, the abstentions of India are come to pacify the ongoing conflict by remaining neutral and also to make India’s interests grow further without being affected as both Russia and West are big trading partners of India militarily, politically and economically. From the history, Russia is looked as one of the closest allies of India which supports India in all odd times which exchanges space technology, defence technology as well as highly classified military weapons and for China too as it share a surplus trade with Russia and also the friendly nation provides support militarily to China.

Another plus point for China emerges here with its payment CIPS(Cross-border Interbanking payment system) system. Since some Russian banks have banned now from the SWIFT international payment system which is likely to make Russia paying for its exports more difficult. Russia has its System for Transfer of Financial Messages (STFM) while China has CIPS and operate in their own countries. As of 2021, only one Chinese bank had joined STFM, although more Russian banks and global financial institutions have connected to the Chinese system. Currently only about 17% of trade between Russia and China uses the Chinese yuan which was increased from 3.1% in 2014 and their energy trade is mostly done in US dollars but with a broad vison to shoot up the value to yuan across the world.

On the other hand, India currently runs trade deficit with Russia with exports declining and imports are increasing. But after Russia facing a bunch of sanctions, India comes with opportunities to increase its trade with Russia in all those sectors where Russia is sanctioned in which India’s self reliance vision will play a key role in India’s developments economically. All these perspectives and growth of countries gradually decide the future of the globe and the ongoing conflict between a Russia-Ukraine would be putting India into the decisive phase where it will have to take bold steps in view to India’s future interests.