NEW DELHI: With sanctions hitting Russia, exporters are being cautious with their supplies as they keep close tabs on freight rates, which may see a further spike due to higher oil prices as well as uncertainty over insurance cover.
“Some countries have already imposed sanctions against Russia, which will impact payments. We are awaiting the OFAC as it provides a winding down period, which will provide clarity on payments,” said Ajay Sahay, the director general of the Federation of Indian Export Organizations (FIEO). The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions. While India and Russia had a rupee-rouble trade arrangement earlier, officials fear that it may not be easy now given the US pressure and it would be seen as New Delhi aligning with Moscow.
In addition, exporters expect the logistics challenges to increase, especially to Ukraine as war is not covered under insurance policies. Besides, with crude oil prices topping the $100 a barrel level, freight rates are expected to harden further.
Already, container freight rates have hardened. The spot rate for a 40-feet container from Shanghai to Los Angeles rose to $11,030, up 3.3% from a week ago and 125% higher than a year ago, according to the Drewry World Container Index, Bloomberg reported on Thursday.
Freight rates had softened a little over the last few months after a sharp rise due to disruptions and long pileups at several ports in the US. Already, Indian exporters were complaining of stretched facilities and higher costs in shipping goods to Russia and other CIS countries as shipping lines had altered their routes.
“Some countries have already imposed sanctions against Russia, which will impact payments. We are awaiting the OFAC as it provides a winding down period, which will provide clarity on payments,” said Ajay Sahay, the director general of the Federation of Indian Export Organizations (FIEO). The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions. While India and Russia had a rupee-rouble trade arrangement earlier, officials fear that it may not be easy now given the US pressure and it would be seen as New Delhi aligning with Moscow.
In addition, exporters expect the logistics challenges to increase, especially to Ukraine as war is not covered under insurance policies. Besides, with crude oil prices topping the $100 a barrel level, freight rates are expected to harden further.
Already, container freight rates have hardened. The spot rate for a 40-feet container from Shanghai to Los Angeles rose to $11,030, up 3.3% from a week ago and 125% higher than a year ago, according to the Drewry World Container Index, Bloomberg reported on Thursday.
Freight rates had softened a little over the last few months after a sharp rise due to disruptions and long pileups at several ports in the US. Already, Indian exporters were complaining of stretched facilities and higher costs in shipping goods to Russia and other CIS countries as shipping lines had altered their routes.
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