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Indian payments for weapons amounting to more than $2 billion have been stuck for about a year, and Russia has stopped supplying credit for a pipeline of about $10 billion worth of spare parts as well as two S-400 missile-defense system batteries that have yet to be delivered, according to the officials, who asked not be identified due to the sensitivity of the issue. Russia is India’s biggest supplier of weapons needed to deter Pakistan and China, Bloomberg reported.

India is unable to settle the bill in US dollars due to concerns about secondary sanctions, while Russia remains unwilling to accept rupees due to exchange-rate volatility, the officials said. New Delhi also doesn’t want to complete the deal in Russian rubles due to concerns about being able to purchase enough on the open market at a fair rate, they said.

India’s government has proposed Moscow use the rupees from weapons sales to invest in Indian debt and capital markets to avoid stockpiling rupees, they added, but Vladimir Putin’s government doesn’t find that appealing.

One possible solution would be to use euros and dirhams, the currencies used to pay for Indian imports of discounted Russian crude, a senior Indian government official said. However, using these currencies to pay for weapons could invite more scrutiny from the US over sanctions than oil, as well as pushing up costs due to unfavorable exchange rates for India.

Another option under discussion is a mechanism for Russia to offset purchases of Indian imports against the price of the weapons, one of the officials said. But this isn’t easy because Russia had a $37 billion trade surplus last year with India, its third-largest behind China and Turkey, according to data compiled by Bloomberg.

India’s Ministry of Defense, Ministry of External Affairs, Finance Ministry and the Reserve Bank of India did not respond to phone calls or emailed requests for comment. The Kremlin and Rosonboronexport, Russia’s state arms sale company, also didn’t respond to texts and emailed requests for comment. The issue of payments for weapons has taken on more urgency of late, and dominated discussions when National Security Adviser Ajit Doval visited Moscow in January, the people said. It also featured heavily in talks in Delhi between Russian Deputy Prime Minister Denis Manturov and India’s External Affairs Minister Subrahmanyam Jaishankar, who said that the rupee settlement needed more work.

“There is also understandable concern about the trade imbalance,” Jaishankar told reporters. “We need to work together with our Russian friends on a very urgent basis on how to address that imbalance.”

India currently operates more than 250 Su-30 MKi Russian-made fighter jets, seven Kilo-class submarines and more than 1,200 Russian-made T-90 tanks — all of which are operational for another decade and need spare parts. Three of five S-400 missile defense systems have already been delivered.

The Indian Air Force, which depends on a Russian fleet of fighters and helicopters, is among the worst hit from the disruption in supplies from Moscow, the people said. It’s uncertain whether Russia can perform regular maintenance, they added, potentially leading to vulnerabilities along India’s borders with China and Pakistan. The India-Russia relationship will come under further scrutiny when Prime Minister Narendra Modi hosts Group of 20 leaders in September, during which the war will be a key focus. That meeting might be holding India back from immediately ironing out the payment mechanism for weapons with Russia, the people said.

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“The South China Sea is now becoming one of those regions where NATO is not averse, as they once did in Ukraine, to escalating tensions,” Lavrov told a news conference.

“We know how seriously China takes such provocations, not to mention Taiwan and the Taiwan Strait, and we understand that NATO’s playing with fire in these regions carries threats and risks for the Russian Federation. It is as close to our shores and to our seas as Chinese territory,” he said.

Lavrov said that was why Russia was developing military cooperation with China and conducting joint exercises.

“The fact that NATO members under the leadership of the United States are trying to create an explosive situation there, in the wake of Europe, is well understood by everyone,” he said.

Lavrov did not provide evidence to back his assertions, but alluded to the formation of the AUKUS alliance between the United States, Britain and Australia.

He also accused NATO of trying to drag India into what he called an anti-Russian and anti-Chinese alliance at a time when he said the West was attempting to squeeze out Russian influence.

When asked about Lavrov’s remarks, India’s UN Ambassador Ruchira Kamboj said: “We are a country that stands tall and proud and stands tall and proud on its own.”

“In the course of the conflict in Ukraine, we have been very clear and consistent right from the outset – we have spoken in one voice that we are for peace. Peace is also a side,” she also told reporters in New York. 

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An report from Reuters has revealed that sanction-hit Russia sent India a list of more than 500 products for potential delivery of items. According to the anonymous sources cited by the report, the list includes products ranging from parts for cars to aircraft and trains.
The list is provisional; it is currently unknown how many items will be exported and in what numbers. However, an Indian government source accessed by Reuters said the request was unusual in its scope.

The request comes when Russia has intensified its missile attacks against Ukraine, obliterating its power grids to cripple its warfighting capability.

India is one of the few countries that has not categorically criticized Russian President Vladimir Putin for waging war on Ukraine and refused to join the sanction regime despite repeated calls.

India has significantly increased the purchase of cheap Russian oil to the detriment of its peers in the West.

The bonhomie between India and Russia is potentially the reason behind Russia’s grand request. Among a sea of products that Moscow is seeking for New Delhi, the most significant are parts requested for its aircraft and helicopters.

While the report did not mention if these parts will be used for military aircraft, it gives a list of items sought.

Russia has reportedly requested 41 items, including landing gear components, fuel systems, communication systems, fire extinguishing systems, life jackets, and aviation tires for its helicopters and aircraft.

Previous reports had hinted that Russian airlines, including the state-controlled Aeroflot, were stripping jetliners to secure spare parts they couldn’t secure from the international market due to biting sanctions. The Russian fleet is composed of Western-origin passenger jets.

Additionally, a source in Russia’s auto industry said that the trade ministry had sent a list of car parts required to corresponding ministries and state agencies in other countries, including India.

It includes car engine parts such as pistons, oil pumps, and ignition coils. There is also demand for bumpers, seatbelts, and infotainment systems.

As soon as the news broke out, military experts quickly emphasized that it was an opportunity for the Indian industrial base to cater to the Russian market besides its own to bolster self-reliance and export.

Even as far as military maintenance is concerned, India has offered to set up Maintenance, Repair, and Overhaul facilities for the Su-30 of the Royal Malaysian Air Force.

There have been speculations that with Russia’s preoccupation with the war and the international sanctions imposed on it, India could exploit the opportunity to offer more such MRO deals to other countries that operate Russian military hardware.

According to reports, India is eager to increase trade in this manner to reduce its growing trade deficit with Russia. However, some businesses have expressed concern about potentially falling foul of Western sanctions.

According to a Moscow industry source that declined to be identified due to the issue’s sensitivity, Russia’s Ministry of Industry and Trade has asked large companies to supply lists of raw materials and equipment they require. The source said that more discussion would be required to agree on specifications and volumes and that the outreach would not be limited to India.

Some Indian sources revealed to Reuters that Russian requests were reportedly made weeks before Indian Foreign Minister S Jaishankar visited Moscow, which began on November 7. However, it was not clear at the time what was conveyed by New Delhi to Russia during the high-profile visit.

During his visit to Moscow, Jaishankar stated that India needed to increase exports to Russia to balance bilateral trade, which is currently skewed toward Russia.

For decades, Russia has been India’s largest military equipment supplier and is the fourth-largest market for Indian pharmaceutical products. However, with increased purchases of Russian oil and increased shipments of coal and fertilizer, India is looking for ways to rebalance trade.

Between February 24 and November 20, Indian imports from Russia increased nearly increased fivefold to $29 billion, up from $6 billion in the same period last year. Meanwhile, exports have fallen to $1.9 billion from $2.4 billion, according to the source.

According to a government source, India hopes to increase its exports to around $10 billion in the coming months due to Russia’s list of requests. However, some Indian companies are hesitant to export to Russia due to concerns about being sanctioned by the West, lacking payment clarity, and difficulties obtaining insurance.

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Russia also said despite the ongoing war with Ukraine that has prompted international sanctions, it has stood by its contractual obligations and delivery of all systems, including the S-400 air defence system, as per schedule.

The delivery of the second regiment of the S-400 system is already underway.

Russia’s Federal Service for Military Technical Cooperation (FSMTC) head Dmitry Shugaev said: “Work is underway to organise the production of the AK-203 assault rifles in India, the serial production of which is expected to begin in late 2022-early 2023. The implementation of contracts for the construction of Project 11356 frigates in Russia and India is also proceeding as planned. The current geopolitical situation has not significantly affected the fulfillment of our obligations.

He was speaking on the sidelines of the Army 2022, an international defence show that is being held by Russia in Moscow.

The head of FSMTC, which deals with all military related deals and commercial cooperation with other countries, said the Russian Federation traditionally offers India the cutting edge models of weapons and military equipment.

“Russia is the only country that engages in large-scale cooperation with India in the field of sophisticated military technologies including transfer of knowhow to Indian partners.

“During more than 60 years of military-technical cooperation, our countries have, in fact, implemented the principle of Make in India,’ he said.

Shugaev said in all those years — with the help of the USSR, and subsequently Russia — hundreds of enterprises and facilities for military production were created in India, “which currently form the basis of the Indian defense sector”.

“With our assistance, dozens of types of high-tech military products have been localised in India. The current stage of our relations in this area of cooperation is distinguished by India’s desire to accelerate the development of its national military-industrial complex, reduce the dependence on imports of military products and join the ranks of the world’s leading arms exporters.

“We support this desire and are ready for industrial cooperation, looking for joint projects that, on the one hand, would be beneficial for Russian and Indian enterprises, and, on the other, would ensure our relations reach a new level of technological partnership,” he said.

Shugaev added the Russian side was ready for cooperation and had already submitted proposals on the joint development and production of modern types of military equipment.

Asked what these were, he said, “A future main battle tank, infantry fighting vehicle, fifth-generation aircraft, diesel-electric submarines and other types of modern weapons.”

Taking a jab at western countries, he underlined, “Once again I want to emphasise that Russia is ready for the widest technological cooperation, unlike the Western so-called ‘partners’, who promise a lot, but in fact are not very eager to share advanced technologies with India.”

He said the military-technical cooperation between Russia and India has no analogues in the world.

Shiugaev noted that many countries today were planning to set up their own military production through the transfer of technology and the acquisition of competencies.

One of the leaders in this sphere is, of course, India, which implements the Make in India program, he said.

“We do understand these trends and are ready to flexibly respond to them. We have a number of similar projects with India — the BrahMos missile, the localisation of tank rounds, and Kalashnikov assault rifles, and the construction of ‘11356 frigates’ at an Indian shipyard,” he said.

He said both India and Russia have the potential to build mutually-beneficial cooperation in the supply of weapons and military equipment.

All types of Russian-made military equipment are widely represented in the Indian armed forces — land, sea, aviation and air defense.

“All Russian-made military products supplied for export have an envisaged potential for upgrade, and the equipment delivered to India is no exception.

“In addition to upgrading, there are other areas of cooperation between our countries, such as creating conditions for servicing the delivered weapons and equipment in India, as well as jointly producing various types of equipment and weapons for sale in third countries,” Shiugaev said.

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Until recently, India bought almost all its frontline weaponry from Russia. Researchers at the Stimson Center calculate that, about 85% of India’s major weapons are overwhelmingly of Russian origin. Moreover, the Stockholm International Peace Research Institute (SIPRI) says that “new orders [from India] for a variety of Russian arms in 2019–20… will probably lead to an increase in Russian arms exports in the coming five years.”

The Indian government’s unwillingness to condemn Russia forcefully for its invasion of Ukraine seems to have raised the question amongst US leaders – how to wean the Indian military off its dependence on Russian arms. The fact is that, like all developing nations, India confronts an impossible trinity when it comes to weapons programs: It cannot simultaneously achieve autonomy, affordability and quality.

New Delhi has long talked of diversifying the suppliers to its huge armed forces, and even making more equipment at home, objectives that have taken on new urgency since Russia’s invasion.

India has identified $324 million worth of defence equipment it wants domestic firms to make this year, and avoid buying abroad, according to an online platform where the defence ministry lists its needs.

Defence transition is always a slow evolutionary process. Suppliers cannot be switched overnight.

Russian Imports

India is the world’s largest buyer of Russian weapons, although it has scaled back that relationship of late. Russia has historically supplied the majority of India’s military hardware, including fighter jets and missiles, as well as almost all its tanks and helicopters. Modi’s government has told the US the alternatives to moving away completely from Russian weapons imports are too expensive.

Over the past decade, India has bought more than $4 billion worth of military equipment from the US and more than $25 billion from Russia, according to SIPRI, which collects data on arms transfers. India’s dependence on Russia for weapons against neighbors China and Pakistan is a big reason Modi’s government has avoided criticizing Russian President Vladimir Putin over the war in Ukraine. As the US, Europe, Australia and Japan piled economic sanctions on Russia, India has held off and instead continued imports of discounted Russian oil.

Russia woos India

On the other hand, Russia’s foreign minister Sergey Lavrov said, on 20 April, that Russia could give India any defence platform and weaponry it wants. He also termed the transfer of defence technology to India as “unprecedented” among the foreign nations that India has ties with.

Asked about the Sino-Indian border dispute, he said: “We welcome the discussions between India and China”, adding that Russia wanted to further strengthen the trilateral Russia-India-China (RIC) format that he said was envisaged by Moscow way back in 1996 and made a reality.

Affordability and Autonomy

Shifting toward buying more Western weapons systems and lessening its dependence on Russia, for instance, would bolster India’s autonomy. But the country would have to sacrifice affordability, meaning it wouldn’t be able to buy as much. India is spending $5.5 billion on the Russian S-400 surface-to-air missile platform. The U.S.-made Terminal High-Altitude Area Defense system costs about six times that much and isn’t even as versatile.

India  is highly unlikely to want to rely on anyone else for essential defense requirements. In its last full-scale war with Pakistan, in 1971, India found itself constantly short of artillery shells and had to secretly import mortars from Israel. Insufficient weapons on hand represent a loss of autonomy that no Indian government could possibly countenance.

Self Reliance

For decades, India has tried to establish a local defense industry, building its own battle tank and jet. The Arjun, the Indian Army complains, can not be part of any battle plans on the canal-heavy, militarized border with Pakistan. It weighs almost 70 tons and would collapse most bridges in the Punjab. By contrast, Russia’s T-90 tank weighs less than 50 tons.

The Indian Air Force has a long list of reasons why the Tejas is not good enough: Its payload is smaller than the F-16’s, the plane takes too long to service and so on.

Indigenization offers affordability and autonomy, at the cost of quality. The Indian state’s toxic relationship with the private sector is one of the biggest obstacles to indigenizing weapons production. But if Indian leaders want a reliable and affordable pipeline of weapons of decent quality that arrive quickly enough to deter an aggressive China, they are going to have to fund domestic defence companies, increase military budgets, and field less powerful weapons until they can develop better ones.

US Preparing Package

The US and its allies have sought to woo Modi’s government as a key security partner – against China in the Indo-Pacific region. Links between the US and India have steadily deepened over the past two decades, with the two sides reaching agreements that allow for more interoperability between their military platforms.

The US is preparing a military aid package for India to deepen security ties and reduce its dependence on Russian weapons. The package under consideration would include foreign military financing of as much as $500 million, which would make India one of the largest recipients of such aid behind Israel and Egypt. It’s unclear when the deal would be announced, or what weapons would be included.

Fixing the problem is going to take time. And it won’t happen unless the Indian defense establishment is willing to make some hard choices. The effort is part of a much larger initiative by President Joe Biden’s administration to court India as a long-term security partner, despite its reluctance to criticize Russia for its invasion of Ukraine.

Washington wants to be seen as a reliable partner for India across the board, and the administration is working with other nations including France to make sure Prime Minister Narendra Modi’s government has the equipment it needs. While India is already diversifying its military platforms away from Russia, the US wants to help make that happen faster.

The major challenge remains how to provide India major platforms like fighter jets, naval ships and battle tanks. The administration is looking for a breakthrough in one of these areas. The financing package being discussed would do little to make those types of systems — which can cost billions or tens of billions of dollars — more affordable, but it would be a significant symbolic sign of support. Still, it remains to be seen how far India will go in accepting US military assistance.

The Biden administration has signaled that it was not interested in sanctioning New Delhi over its recent decision to buy the S-400 missile defense system from Russia. Turkey’s purchase of the same system deeply damaged US ties with the NATO ally.

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The Indian security establishment is keeping a close eye on the Russia-Ukraine developments and calculating the immediate and long-term impact on the country’s defence capabilities.

About 70 per cent of Indian defence equipment are of Russian origin. However, India procures many parts of the Russian systems from Ukraine. This is because several manufacturing hubs remained with Ukraine after USSR disintegrated.

One of the main problems facing Indian forces has been servicing and maintenance of Russian military equipment since spare parts are in short supply and have to be imported not just from Russia and Ukraine but from other countries as well.

Indigenisation

Amid the ongoing Russia-Ukraine war, India issued a list of 107 sub-systems, on 24 March, that are to be banned from import and indigenised over the next six years. Several of the items on the list are meant for T-90 and T 72 tanks, warships, helicopters, infantry combat vehicles, missiles, ammunition and radars among others, all of which are procured from either Russia or Ukraine.

The subsystems or strategically-important line-replacement units – will now be “indigenised”, or procured only from the Indian industry. The import of these products will be phased out from December 2022 to the end of 2028.

Incidentally, both India and Russia were already working on a deal to indigenously manufacture the spares here through tie-ups, something which had come up for detailed discussion in 2019 between Prime Minister Narendra Modi and Russia President Vladimir Putin.

The government had, in December 2021, issued the first positive indigenisation list of subsystems, assemblies, subassemblies and other components.

Two thousand and five hundred imported items from that list have already been indigenised and the other 351 will stop being imported in the next three years.

Russian-origin tanks

Amid the ongoing war between Russia and Ukraine where the anti-tank missiles have achieved significant success against armour, the Indian Army is going to incorporate the lessons of the conflict in the design of its futuristic main battle tank.

The Indian Army has been one of the biggest users of Russian armour including the T-90, T-72 and BMP-series infantry combat vehicles which are the mainstay of the force.

In the Ukraine-Russia conflict, reports from the war zone have suggested that the Ukrainians have extensively used anti-tank guided missiles to exploit the weakness of the Russian armoured vehicles and achieved significant success too.

Indian armed forces have been keeping a close eye on the developments on the battlefield as a lot of equipment is common including the tanks being used there.

The inputs are being analysed and the lessons would be incorporated into the design of the futuristic main battle tanks that would be produced and used by the Indian Army in coming years.

The Indian Army earlier used to deploy these tanks only along the desert and plain borders with Pakistan but they have now become the face of Indian resolve along the China border too as large numbers are deployed there from Ladakh to Sikkim.

In the Russia-Ukraine war going on for around 46 days now, a number of European and North American nations are supplying anti-tank and anti-aircraft equipment such as the Carl Gustaf anti-tank rocket launchers, NLAWs and AT-4.

The design of the tanks is at least three to four decades old but the anti-tank missiles and rockets have been designed as per the latest requirements and have an upper hand in the present scenario.

The Indian designers would make an attempt to offset that advance in the futuristic main battle tanks that would be built some years from now, they said.

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India’s neutral stand is mainly because all the key protagonists in the crisis are India’s close allies. Hence, India’s unaligned and diplomatic efforts. Possible support to Russia might hamper India’s relations with the NATO countries, including USA.

India’s stand on Ukraine has been appreciated within the country and by other countries, notably Pakistan, whose prime minister Imran Khan too appreciated India’s role and policies.

India-Russia relationship still continues to remain strong. Russia has been a significant supplier of military equipment. India is also procuring the S-400 Triumf Missile from Russia, despite strong US opposition.  A new ten-year defence pact between the two countries was being discussed. India-Russia annual trade is also worth about $10 billion. India’s support to Ukraine may mean Russia developing stronger ties with China and Pakistan. That can be a real-time threat to India’s national security.

Ukraine has consistently taken anti-Indian position in the United Nations, be it in terms of voting against India in UNSC after 1998 nuclear tests, voting for UN intervention in Kashmir after abrogation of Article 370 or in terms of selling military equipment to Pakistan to use against India.

India wants de-escalation of the crisis, but only through arbitration or conciliation. Thus, considering all the angles to this crisis, India is adopting the strategy to solve this dispute keeping in mind that any country’s national interest is above the overall global interest.

The US has managed to get most countries on its side, and the United Nations resolution condemning the Russian invasion has been supported by many countries. Countries like India chose to abstain from the vote due to a strong and continuing linkage with Russia, and due to considerations of what such a vote will imply to the geopolitics of the region.

The immediate impact is, of course, adverse due to high oil prices and investor nervousness. India has a very large oil deficit and also a current account deficit. The latter needs a continuous supply of foreign investor dollars to plug that deficit. On food security, India is on a strong footing. Its military capabilities are significantly inferior to China, mainly due to a resource constraint. But the level of preparedness and the advantage of terrain means that the asymmetry is considerably reduced.

The US will soon have to think about the more important geopolitical alignment and strategy around its bigger rival, China. So far, the Quad formation (with the US, India, Japan and Australia) has not delivered any tangible benefits to India. But the strategic importance of India could grow. It is conceivable that in a new configuration, the Americans will value an alignment with India more than the reverse. India, too, has a strong trade and investment relationship already. If its domestic economy shows steady and consistent high growth, it can become important to the US when dealing with a strong China.

Chinese Vice Foreign Minister Le Yucheng attacked the Quad thus, “No country should pursue its so-called absolute security at the expense of other countries’ security.” He drew a parallel between the situation in Ukraine — according to him, a result of “the NATO strategy of eastward expansion” — and the several provocations perceived by Beijing in the Indo-Pacific. The analogy does not hold. Amid recent geopolitical developments, India’s foreign policy priorities and the ties fostered with members of the Quad are holding fast.

The Quad is a response to China’s rising ambitions, which have manifested in the form of occupying islands and trying to control sea lanes in the Indo-Pacific, as well as its activities along the Line of Actual Control with India.

Both the Japanese and Australian prime ministers reportedly discussed the situation in Ukraine with prime minister Narendra Modi, and did not insist that India echo their position.

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