Loaded with Massive Reserves
of Rupees in Indian Banks, Russia Buys “Sensitive” Goods from New Delhi Despite
Embargo – Reports
India’s
oil and weapons purchases from Russia have consternated the US and its allies. To
add more fuel to the fire, leaked Russian state correspondence and unnamed Western
officials indicate that Moscow has been acquiring sensitive goods from India.
·
Kremlin
has been considering shifting its manufacturing facilities to India to secure components
for its war effort.
·
Russia
and its Indian partners traded in dual-use technologies - they have been targets
of sanctions from Western countries. These components included parts for “telecommunication,
server, and other complex electronic equipment.”
·
The
oil trade between India and Russia has almost doubled to US $65 billion in 2023.
·
An Indian
company, Innovio Ventures, that supplied at least US $4.9
million worth of electronics, including drones, to Russia and shipped another US
$600,000 worth of goods via Kyrgyzstan.
·
US accepting
the historic ties of India and Russia when New Delhi inked the deal to purchase
S-400 surface-to-air missiles.
·
Indian
corporations to use the St. Petersburg International Economic Forum (SPIEF) to strike
deals and establish themselves in Russia.
·
Russia
supplied 65 percent of Indian weapons valued at US $60 billion.
·
The
two countries are jointly manufacturing the BrahMos cruise
missile and plan to produce AK-203 rifles in India.
Documents
published in the Financial Times report that the Kremlin
has been considering shifting its manufacturing facilities to India to secure components
for its war effort.
According
to the British newspaper report, the Russian industry and trade ministry responsible
for defense production to support its Ukraine invasion
planned to spend around Rs 82 billion (US 1 billion) in October 2022 to secure critical
electronics through covert channels.
Russian
banks have “significant reserves” of rupees from the oil they sold to India. India
has also been a source of critical goods for the country waging a protracted war,
which was earlier sourced from “unfriendly countries.”
The
US Commerce Department has implemented restrictions on the export of high-tech products,
such as aircraft equipment and semiconductors, to Russia to curtail its military
capabilities. The export restrictions extend to goods other countries produce using
American technology.
The
FT report stated that “Moscow even envisaged pumping investment into Russo-Indian
electronics development and production facilities” but added the disclaimer that
the extent to which Moscow enacted its plan was unclear.
The
Russian Consortium for Foreign Economic Activity and International Intergovernmental
Cooperation (Ved MKKP) in Industry was supposed to purchase
critical components from India. This organization is closely linked to the security
service.
According
to the report, Ved MMKP’s report detailed plans to carry
out transactions through a “closed payment system between Russian and Indian companies”
to evade Western scrutiny. The oil trade between India and
Russia has almost doubled to US $65 billion in 2023.
India
imported little Russian crude before the invasion of Ukraine. However, it has now
become the Number two importer of Russian oil after China. India has assumed the
role of the middleman, refining Russian crude and re-exporting
it to European nations that are subject to the ban.
The
report names an Indian company, Innovio Ventures, that supplied at least US $4.9 million worth of electronics,
including drones, to Russia and shipped another US $600,000 worth of goods via Kyrgyzstan.
Prime
Minister Narendra Modi’s balancing act between Russia and the US has been a point
of friction between Washington and New Delhi. In July, US Deputy Treasury Secretary
Wally Adeyemo warned India’s top business organizations that any institution doing
business with Russia’s military-industrial base risks sanctions, regardless of the
currency used.
It
was in contrast to the US accepting the historic ties of
India and Russia when New Delhi inked the deal to purchase S-400 surface-to-air
missiles.
Filling
The Gap
In
December 2023, Russia expressed interest in Indian companies taking over businesses
abandoned by US and European companies amid the prolonged war with Ukraine. They
wanted Indian corporations to use the St. Petersburg International
Economic Forum (SPIEF) to strike deals and establish themselves in Russia.
Alexey
Volkov, Deputy Director of the Roscongress Foundation
and Director of SPIEF, contended that the Russian economy has several niche areas
that have been left vacant by European and American companies that had to leave
due to pressure from their governments. Besides India, China has been keen to make
inroads into the Russian economy.
Since
December 2022, Ukraine’s Western allies have embargoed their companies from shipping,
insuring, buying, or selling loads of crude sold at above $60 per barrel. Russia
has responded by building a so-called “shadow fleet” of vessels—opaquely owned,
doubtfully insured, and usually old—that allow them to circumvent this ban.
Moscow
is losing out on about $175m (£140m) a day from fossil fuel exports due to these
measures, according to a study by the Centre for Research on Energy and Clean Air
(CREA). Major Russian banks have also been removed from the international financial
messaging system – Swift.
Both
China and India are increasingly purchasing oil and gas in their local currencies
to circumvent these sanctions. At the start of 2022, Russia supplied less than 2%
of India’s oil imports, but it is now on course to become its largest single supplier.
India-China-Russia
Triangle
India
has been dependent on Russia for its defense purchases.
Data from the Stockholm International Peace Research Institute suggests that in
the last two decades, Russia supplied 65 percent of Indian
weapons valued at US $60 billion.
New
Delhi has been shoring up its domestic manufacturing capability instead of taking
up Russia’s offer to jointly manufacture helicopters and fighter jets. In the coming
decades, India will need Russia’s spares and maintenance support for its existing
inventory.
At
the moment, the two countries are jointly manufacturing
the BrahMos cruise missile and plan to produce AK-203 rifles
in India.