The trade between India and Russia is growing at an astonishing rate, mainly because of the discounts offered by the Russian government on crude oil following the Ukraine war.
Before the whole conflict began, the bilateral trade between Russia and India stood at a mere $8.1 billion, according to the website of the Russian embassy in India.
The ongoing sanctions pose a serious threat to the existing trade, as the insurance companies are mostly controlled by western nations.
It should also be noted that the goods need to be mandatorily insured, and if the Indian companies are unable to find alternative insurance providers, it could lead to a decline in the trade between the two countries.
Why is this move important?
This move can be substantial in challenging the hegemony of western insurance companies. The world trade system is highly monopolised by insurers based out of the countries situated in the western hemisphere
. Post-sanctions, it has become very difficult to get insurance on the goods being imported from Russia, especially crude oil, for which the price is capped at 60 dollars per barrel.
This new consortium might work as an alternative to the western system of operating and might become the go-to option for countries importing goods like fertiliser and crude oil from Russia. This also affirms the position of New Delhi that the current policies were fabricated with India in mind and not just any foreign country.
The step also encourages and supplements the flagship Aatma Nirbhar Bharat project, as preference will be given to general insurers based out of India.
Benefits that India will get after the incorporation of the pool
After the pool is incorporated, the insurance companies in India will finally tap a market that is worth billions of dollars and is only estimated to grow year over year. This will also enhance India’s position as a world leader and help Indian importers bring in Russian fertiliser smoothly.
According to reports, Russia offered a huge discount of 35 dollars per barrel on the pre-war prices. Additionally, the incorporation of the pool will help India mitigate the risks associated with importing crude oil and fertilisers from Russia, which is a major supplier. This will ensure a stable supply of these essential commodities and reduce India’s dependence on other countries.
Which companies will participate in the process?
Government-owned reinsurer GIC Re will assist in creating an INR5 billion (SG$88.7 million) insurance pool to cover India’s imports from Russia, despite its initial reservations. Despite being formally known as the fertiliser pool, it will also be used to cover the risks associated with importing Russian oil and gas, according to Business Standard.
GIC Re will contribute about 40% of the pool, with the remaining insurance coming from a variety of Indian companies, some of which are government-owned.
To conclude The trade between India and Russia is growing rapidly due to the discounts offered by the Russian government on crude oil. However, the ongoing sanctions pose a serious threat to the existing trade, as the insurance companies are mostly controlled by western nations.
This move could challenge the hegemony of western insurance companies and provide an alternative to the western system of operating.
The incorporation of an INR5 billion (SG$88.7 million) insurance pool to cover India’s imports from Russia will enhance India’s position as a world leader and reduce its dependence on other countries. GIC Re will contribute 40% of the pool, with the remaining insurance coming from Indian companies, some of which are government-owned.
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