India is contemplating extending guarantees on lenders' letters of credit (L/Cs) as New Delhi seeks ways to support trading links with Russian counterparties.

Soft loans to exporters grappling with a financial crunch triggered by the invasion of Ukraine and subsequent Western sanctions are also being mulled according to Reuters.

Increasing difficulties

Indian banks are reportedly facing increasing difficulties with bills for imports from Russia bouncing and payments for exports becoming stuck.

Speaking on condition of anonymity as the discussions are not public, a government official disclosed to Reuters that Indian exporters are owed approximately US$500 million by Russian counterparties.

L/Cs most likely option

The government is therefore mulling over the possibility of providing guarantees on banks' L/Cs or loans to alleviate the strain. "L/Cs are the most likely option," the official reportedly said.

India has viewed Russia as a longstanding ally dating back to the Cold War era, with significant collaboration in defence, oil, nuclear energy, and space exploration.

But this partnership has faced growing strains due to Moscow's strengthening rapport with China, India's principal competitor, while Indo-Russian relations have also been influenced by the conflict in Ukraine and its attendant sanctions.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.