Ripples of war

India has trade relations with both Russia and Ukraine. Also, thousands of Indians live there. Indians mostly go to Ukraine for studying while Russia is an important destination for doing business and studying. At present, about 20,000 students are stuck in Ukraine — most of them are medical students. In Russia also, about 14,000 Indians are stuck.

Even though Russia has invaded Ukraine, America or other countries have abstained from direct involvement in the war. Instead, the US and NATO countries have chosen to impose certain sanctions on Russia, which are not very effective. It seems that Russia — largely unmoved by the sanctions — had decided to attack Ukraine only after full preparation. In such a situation, there is a possibility of disruption of supply of certain products globally.

The price of international oil has increased by about 17 per cent but, due to elections in India, domestic oil prices are largely kept in control. After the election results, oil prices may see a hike.

Saudi Arabia, Russia and America are the three largest oil producing countries in the world. Russia produces 12 per cent of the global crude oil, Saudi Arabia 12 per cent and the US 18 per cent. India imports 80 per cent of its oil requirements — mostly from Saudi Arabia and America. Some of the oil also comes from countries like Iraq, Iran, Oman, Kuwait, Russia etc.

India's oil imports could be partially affected by the war between Russia and Ukraine — increasing the cost of imports and reducing foreign exchange reserves. If the war is prolonged, India may particularly face difficulties on the foreign exchange front.

Internationally, Brent Blend oil costs around USD 105 a barrel, while West Texas Intermediate (WTI) is priced at USD 98.84 a barrel. WTI is the best quality crude oil in the world. The share of natural gas in India's total fuel consumption is about six per cent and India is completely dependent on imports for its supply. India imports it from countries like Qatar, Russia, Australia, Norway etc. It is called Liquefied Natural Gas (LNG). After arriving in India, it is converted into PNG and CNG. It is then used in factories, power generation companies, CNG vehicles and kitchens.

Russia is the largest exporter of natural gas in the world. It produces 10 per cent of the global demand. With an USD 1 increase in the price of domestic natural gas, the price of CNG in India increases by about Rs five per kg. At present, the price of CNG in India may increase by Rs 15 to 20 per kg due to war. With the rise in the price of natural gas, the price of cooking gas can also increase, enhancing the subsidy cost of the Indian government.

Russia sells 40 per cent of its oil and natural gas to Europe, which it may shut down because of the war. Therefore, the US is trying to convince Qatar to sell LNG to Europe. Currently, Qatar is selling LNG to countries like India, China, Japan etc. If Qatar agrees to sell LNG to Europe, then Qatar can cut India's share of LNG which will increase the problems of India further.

According to data from Trading Economics, India imported edible oil worth USD 1.45 billion from Ukraine in 2020. This shows that India is partially dependent on Ukraine for meeting its domestic requirements of edible oil. The outbreak of war has disrupted supply chains and raised the possibility of a jump in the price of edible oil in India. The price of edible oil had more than doubled in the year 2021 in comparison to the year 2020 in India. In such a situation, edible oil can be completely away from the reach of the public.

Ukraine is also the world's largest exporter of refined sunflower oil. In second place is Russia. India imports sunflower oil from these two countries. Hence, its availability may be curtailed in India due to the ongoing war. India also buys fertilizers in large quantities from Ukraine. In 2020, India bought fertilizers worth about USD 210 million, and nuclear reactors and boilers worth about USD 103 million from Ukraine. Ukraine is India's largest supplier of nuclear reactors and boilers. Therefore, the current war is bound to have an adverse impact on India's nuclear energy projects.

Russia is the world's largest exporter of palladium, which is used in the manufacturing of many valuable products. Russia and Ukraine are major suppliers of weapons globally, including India. Therefore, this war can also have a negative impact on the supply of arms in India. Apart from this, India also imports pearls, precious stones and metals from Russia.

The negative impact of military action between Russia and Ukraine can also be seen on the Line of Actual Control (LAC) between India and China because China can take advantage of the opportunity and exert diplomatic pressure on India. Since the full focus of America is on Russia right now, this possibility cannot be ruled out.

Russia is one of the largest wheat exporting countries in the world, while Ukraine is the fourth largest exporter of wheat. If wheat exports of both the countries are taken together, it will account for about a quarter of the total global exports. At the same time, India is the second-largest country in the world in terms of wheat production. Therefore, it is being speculated that the countries which were importing wheat from Russia and Ukraine can now import wheat from India, as the demand of India's wheat has increased globally in the last few years.

The ongoing war between Russia and Ukraine does not seem to end anytime soon, as both countries are not ready to bow down. Also, the sanctions imposed by the US and NATO countries are not very effective, which is making it easier for Russia to continue the war. In such a situation, there is a strong possibility of increasing difficulties for India in the coming days. Especially, for common Indians — already suffering from inflation — the war is likely to increase the price of fuels as well as food products, vegetables etc.

Views expressed are personal