Indo Russian Arms Trade To Now Be Conducted In Rupees And Rubles
Russia has always been a very important strategic partner of India since the days of USSR that is last 60 years. Recently also India has entered into several defence deals with Russia thus carrying on the tie between the countries. India has been engaged in a negotiation of a deal to procure defence equipment from Russia worth about Rs 140,000 crores, including a RS 40000 crores deal signed in November 2018 to procure five Almaz-Antey “S-400E Triumf” self-propelled surface-to-air missile systems and a RS 21000 crores contract signed in March 2019 to lease another Project 971 ‘Akula’-class nuclear-powered attack submarine.
The arms trade in the days of USSR use to take place in similar manner. Once again this move of engaging in a financial transaction in the national currencies for arms delivery has strengthened ties between New Delhi and Moscow. Such deals will enable central banks of both the nations to transact in ruble and rupee as well as other currencies like euro, thus US dollars can be ignored.
In September 2018, a payment equivalent to about Rs 280 crores was transferred in the two currencies as payment for the mid-life upgrade of one Indian Navy ‘Kilo’-class submarine.
In October 2018, the Russian export agency, ‘Rosoboronexport’ entered into a deal with the public-sector Syndicate Bank in New Delhi, under which the Indian bank was to pay Russia’s Sberbank in rupees and rubles with direct bank transfers for purchases.
The deals thus forces raise the the US to rethink regarding its foolish move through CAATSA. It should realize that USA has no potential to coerce a country like India and it should not even try.
India defence ties with any country will be as per its choice and mutual agreement between the two. India wants to have good trade relationship with even the USA but such interference through CAATSA will only derail the ongoing harmony.
This South Asian nation is now a growing world power along with China and both USA and Russia have to realize this and adjust themselves accordingly. Because of augmenting geostrategic importance of India and China, diplomatic relationship with these countries will form the centre stage of both Russia and the US foreign policies. One of the chief concerns of relationship with India and China is governed by defence ties and defence trades.
The threats of hollow sanctions from the US will not sway New Delhi and Beijing away from maturing their defence and trade ties with Russia.
CAATSA can only discourage small countries from engaging in defence relationship with Russia. Additional US law enacted in 2018, provides an opportunity to chief US security partners to escape the CAATSA through potential waiver if they procure to reduce their defence deals with Russia.
The US integrated the CAATSA into its legal framework as a response to Russia’s annexation of Crimea in 2014 as well as its alleged interference in the 2016 US Presidential election. However India will not bother itself to even read what is written in the CAATSA legislation
Despite the threat of CAATSA, India and China have indicated a continuing willingness to procure materiel from Russia and the recent move of signing complex deals with Russia’s VTB Bank and its counterparts from both the countries that in all possible ways will facilitate defence trade between Moscow and New Delhi, and Moscow and Beijing, highlights the same.
Both China and India are important defence trade partners of Moscow, and the contracted deal will enable payments for defence equipment to proceed in local currencies of these nations, ditching requirements for the US dollars and also the need to support such contracts through traditional letters of credit.
Under the deal, the VTB bank of Russia and the Merchant Bank of China will facilitate payment made in ruble and yuan, the currencies of Russia and China respectively, between the two countries through mutual settlements from 2020.
The payment method also includes the application of “gateways” to circumvent the international Society for Worldwide Interbank Financial Telecommunication (SWIFT) banking messaging system. The payment method will enable Russia to sustain high levels of international military sales.
Russia is an important defence trade partner of China, as with defence acquisitions from Russia worth between USD1.5 billion and USD2 billion a year owning to China’s purchase of the “S-400E Triumf” system and “Sukhoi Su-35” fighter aircraft from Russia, in the near future is to witness an upward hike.
The purchase attracted China the first-ever imposition of CAATSA in September 2018, by the US that resulted in a prohibition on foreign exchange transactions under the US jurisdiction, a prohibition on transactions with the US financial system as well as a denial of export licences. The sanctions have nor curbed China’s intent of procuring addition “Su-35s” or the “Sukhoi Su-57” from Russia to augment its defence calibre.
