China on being sanctioned has used barter system to settle payments with Russia for weapon purchases made.
In the past India too has used this system to avoid US sanctions. However now for the current purchase of heavy duty weapon systems costing over Rs 60000 crores barter option may not work as Indian export earnings to Russia does not cover the entire amount. Indian export to Russia in 2018-19 was just about Rs 14000 crores whereas imports from Russia was about Rs 56000 crores.
Now USA in display of arrogance and selfishness has once again imposed sanctions on India and China with respect to purchase of oil from Iran. This kind of arrogance combined with financial threats from any country should be beyond tolerance for India.
The Donald Trump administration passed CAATSA in 2017 with the aim to hurt Russia, Iran and North Korea through punitive sanctions. Nearly 39 Russian entities have been placed on the blacklist.
Any country or company dealing with them could attract sanction. Some of the Russian entities are Rosoboronexport, Almaz-Antey, Sukhoi Aviation, Russian Aircraft Corporation MiG, and United Shipbuilding Corporation. CAATSA came into force from April 2018.
A team of Indian officials led by the Defence Secretary Sanjay Mitra was in Russia last week to discuss various issues including the payment channel for various defence purchases.
India will be paying Rs 60000 crores spread over several years for the purchase of S400 missiles, nuclear SSGN and frigates. India may use a mix of Euros and a Rupee-Rouble transfer to pay for these purchases.
However even payment in Euros to Russia isn’t entirely CAATSA free because it will have to be made through the SWIFT system (Society for Worldwide Interbank Financial Telecommunication) which is under US control.
Therefore the issue of paying Russia or any other country from which India decides to make purchases needs to be sorted out completely.
Ways and means have to be worked out. Firstly we should start reducing our foreign exchange reserves which are in US dollars.
Our main reserves should be in gold and also other strong currencies like Euro and others.
Secondly our assets in USA must not exceed the value of American assets in India. So that if the Americans freeze our assets and we can reciprocate in equal measures.
Then there is need to increase our export to Russia, China and other countries from where we need to import our essentials.
