Asian Concerns Over Looming Secondary Sanctions For Supplying Russia Raw Cotton
An academic conflict is developing about which is the more globally important: Ukraine, or Asia.
Central and South Asian countries are becoming concerned about sheer volume of sanctions the United States is placing on Russia as this is impacting their own manufacturing. One of the issues now appearing on the horizon is raw cotton, a significant crop in Asia.
US Secretary of State Antony Blinken visited Kazakhstan and Uzbekistan in early March and warned their governments about the need to comply with the sanctions of the West against Russia. Otherwise, he said, there will be consequences. Raw cotton sanctions are being planned for inclusion in the Russian sanctions products in H2 this year with the threat of secondary sanctions being imposed against the Central and South Asian economies.
The goal is obvious: to block the development of the Russian textile industry by provoking a shortage of raw materials. At least 60% of the Russian industrial capacity has long been tied to cotton processing, with the Russian textiles industry almost 100% dependent on imports from Azerbaijan, Bangladesh, Brazil, China, Egypt, India, Kazakhstan, Pakistan, Sudan, Turkiye, and Uzbekistan.
All these countries may fall under parallel anti-Russian sanctions, although the extent of the actual secondary sanctions may vary. It also signals a shift in strategy in targeting specific Russian industries regardless of whether they are directly involved in the Ukraine conflict or not. Kiev will argue Russian soldiers are equipped with clothing derived from cotton. Asian manufacturers will point to the fact that cotton production is a major industry employing millions of people and an integral part of their own economies. An academic conflict is developing about which is the more globally important: Ukraine, or Asia.
World cotton prices have been growing since 2022 and, according to forecasts, this trend will continue. India currently accounts for 40% of all global cotton supplies with China second, however the United States also has its eyes on developing its own cotton industry. Russian payments for imported cotton (including cotton fibre) are estimated at US$300 million per annum and increasing.
Russia therefore is taking steps to restore the South Russian cotton growing industry, which began in the mid-2010s in the Lower Volga region, and in Stavropol and Dagestan, after a period of some stagnation, is now accelerating. Cotton has long been cultivated in the Crimea.
The Russian cotton industry has been encouraged not just to ring-fence it from sanctions – this is a modern occurrence. Instead, this was encouraged to take advantage of the growing supply of raw materials Central Asia, as well as from the same Egypt, China, Turkey, Pakistan, Syria, Sudan and so on, as trade partners with Russia.
Russia’s domestic annual demand for cotton is estimated at 230-250 thousand tonnes, of which up to 25% can be replaced by South Russian raw cotton in the next 1-3 years. The rest needs to be sourced elsewhere.
It is also important that the development of cotton growing makes it possible to reduce the area of unused land, and therefore avoid the degrading of potential agricultural soils while creating employment both in agriculture and in light industry.
The US use of sanctions meanwhile continues, although in cotton there is a twist. In the mid-2010s, Washington imposed a ban on imports of Turkmen and Uzbek cotton to the United States under the pretext that child labour was being used in these countries. This ban was lifted in 2021, although the US does not need cotton imports, because it remains among the largest producers and exporters of the material.
This indicates that the United States is concerned about cotton deliveries to Russia from Central and South Asia. Whether it can import enough to keep the Central and South Asian governments satisfied to mitigate against secondary sanctions however is another matter – but one that will become a global political football later in the year.
Some of the data contained within this report has been challenged by the Discover Natural Fibres Initiative.