Will the Indian defence industry hit By Western sanctions on Russia?

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Western sanctions on Russia could threaten India’s $375 million export contract of BrahMos cruise missiles with the Philippines.

A wide cross-section of serving and retired service officers and defence analysts in New Delhi feared that India’s military faced the ‘grim and worrying’ prospect of interrupted and interminably delayed Russian defence kit.

The world’s major powers have imposed a new set of sanctions against Russia shortly after President Vladimir Putin launched a special military operation in Ukraine in the early morning of February 24.

India is a major importer of Russian arms. So, Eurasian Times interviewed many experts to find out whether sanctions against Russia would have any effect on existing agreements between Moscow and New Delhi.

According to a 2020 report by the American think tank Stimson Center, 86% of India’s weapons are of Russian origin. Between 2014 and 2020, India purchased 55% of its weapons from Russia.

“With widespread sanctions enacted upon Moscow, its domestic defence industry will most definitely be severely degraded on multiple fronts, particularly with regard to meeting export orders to India,” said Brigadier Rahul Bhonsle (retired) of the New Delhi-based Security Risks consultancy group. And, since India was one of Moscow’s principal defence equipment providers, Delhi had to somehow ensure a steady supply of not only critical Russian military platforms, but spares and ancillaries for the bulk of equipment already in service, he cautioned. Sanctions on Moscow, Brigadier Bhonsle added, had the potential to ‘severely dent’ India’s overall military capability in the short and medium term.

India is in a difficult position

Such disruptions create “serious divisions” in the region, it said, at a time when India faces threats along its disputed northern and western borders from nuclear rivals Country Pakistan and China.

However, Russia had earlier assured India that while Western sanctions would cause anxiety and mistrust, Moscow was looking forward to implementing its “big defense plans” with New Delhi. However, as newer sanctions keep coming in, the possibility of a broken supply chain becomes inevitable. But in reality, as newer sanctions continue to be imposed, the resulting supply chain disruption is inevitable.

India is procuring S-400 air defense systems from Russia, some of which are already deployed in Punjab, to counter a potential attack from both China and Pakistan. India also recently signed a contract for the sale of AK-203 rifles with Russia, of which production in India is expected to begin soon. So any disruption could make it more difficult for Indian ground troops in the border areas with China and Pakistan.

India is also procuring warships from Russia and the hardest part, according to officials, is the $950 million contract signed in 2018 in which Moscow provided four sophisticated stealthy Talwar-class frigates to the Indian Navy. These warships are said to be powered by gas turbine engines supplied by a Ukrainian company. The current war in Ukraine complicates this process. But recently India already delivered the engines to Russia.

However the most worrisome may be BrahMos. Sanctions imposed by the US and Europe on Russia could jeopardize India’s recent $375 million export contract of BrahMos cruise missiles with the Philippines. The engine and seeker of this missile system are supplied by the Russian company NPO Mashinostroyenia (NPOM). The company has a joint venture with the DRDO

And, if sanctioned, it could jeopardize India’s first major overseas deal. This is a project announced by the Ministry of Defense (MoD) with the goal of increasing the country’s defense exports to 5 billion USD by 2025.

How is India affected?

Squadron Commander Vijainder K Thakur, a military analyst, and former IAF Jaguar pilot, said it was clear that the sanctions would not have much of an impact on India.

“I don’t think the new sanctions will affect India’s procurement of existing weapons systems from Russia. For example, our purchase of S-400 does not involve USD transactions and BrahMos Aerospace is a largely Indian-owned company ,” he said.

“For the logistics and maintenance of defense equipment procured from Russia, both countries are increasingly dependent on localized production of spare parts and maintenance joint ventures with companies dominated by India. majority”.

“Another aspect of the Russo-Ukrainian conflict is that India has been sourcing a lot of Soviet-era military equipment from Ukraine because Russia has upgraded the equipment to more advanced equipment and we only use spare components. Now we will only have to deal with Russia, ” he added.

To protect themselves from future CAATSA sanctions, India and Russia are avoiding the USD sanctions. It is likely that in the coming days India and Russia will also have to avoid euro-denominated transactions, he added.

Under the Countering America’s Adversaries Through Sanctions Act (CAATSA), the US is continuing to communicate with India about the risks of sanctions on the purchase of the S-400 missile system from Russia. However, in January, the US State Department said it had not yet made a decision “regarding this transaction”.

According to State Department spokesman Ned Price, the US continues “to urge all countries to avoid major new transactions with Russian weapons systems”. Washington has imposed sanctions on NATO ally Turkey for purchasing the S-400 air defense system and also removed Ankara from the list of buyers of the F-35 complex.

Will the US “sacrifice” India?

However, so far, experts and observers remain optimistic about the waiver of sanctions on India, given its strategic significance to the US in containing China in the Indo-Pacific region.

“Currently, India’s biggest worry is that the CAATSA waiver has not been decide yet. If the US decides not to waive CAATSA sanctions waiver for purchasing the Russian S-400 system, it will be a big win for New Delhi,” said one expert.

It is currently unclear how some of the other US and Western sanctions against Russia will affect India.

“But it is likely that it will not cause a prolonged military stagnation, will not negatively impact India-Russia defense cooperation,” said Happymon Jacob, Professor of National Security at the School of International Studies, University Jawaharlal Nehru School, New Delhi, said.

According to military expert Joseph P Chacko, Russian payments will be settled even if the country is cut off from the SWIFT system.

US financial sanctions do not affect India-Russia arms trade. But CAATSA is a law that is likely to affect Russian arms supplies to India and has so far not been used.

Another important aspect is that despite being a major buyer of Russian weapons, India contributes very little to Russia’s GDP. Even India’s total annual trade with Russia is under $10 billion. So why would the US lose an anti-China ally for such petty reasons?

And though India had reduced its dependence on Russia for military equipment by some 33% between 2011 and 2020 in an effort to diversify its network of materiel suppliers, switching to alternate sources was not an option military planners in Delhi desired, as it entailed colossal expenditure, reworked infrastructure and inordinate delays.

“India can ill afford all these major drawbacks at a time when the security situation in its immediate and extended neighbourhood is fast deteriorating,” said military analyst Major General A.P. Singh (retired). Changing suppliers is not even a default option presently, he declared, adding that sanctions on Russia over Ukraine spelt danger for India.

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