India To Buy Russian Arms in Euros To Bypass American Threats

India is likely to make its payments for Russian arms in euros to a Russia-nominated bank to bypass the threat of US sanctions for purchase of military hardware including the S-400 air defence missile system. The S-400 deal between India and Russian manufacturer Almaz-Antey has been a thorn for Washington since a long time.

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The sale of Russia’s highly coveted air defence missile system S-400 has caught the ire of the US. The S-400 deal is the latest in the list of countries that have chosen to ignore America’s sanctions. The S-400 India is particularly lucrative for India’s path towards military modernisation.

The S-400 India deal is particularly interesting as it comes at a time where the American defence manufacturing community is seeing a dip in favours. The American counterpart to the S-400, the Patriot missile system, has a downgraded value in the market.

India is one of Russia’s largest buyers and most transactions through the years have been “rupee-rouble”. In this particular scenario, Russia’s VTB Bank has agreed to procure the S-400 deal with India through payment in Euros. A similar method of alternative payment methods was used for critical spares and repairs, including work on the INS Chakra.

India has incurred over $4 billion worth of payments to Russia in this financial year, the S-400 deal being the largest, followed by a submarine lease (Chakra 3) and the procurement of four frigates for the Indian Navy. Along with these two additional Russian contracts are awaited, the provision of AK 203 rifles to the armed forces and the inking of an Army contract to procure Ka-226 helicopters that will be manufactured by a HAL-Russian Helicopters JV.

The Indian Bank NSE 2.31 % is selected for the transaction for it would have the least exposure to the US dollar. VTB Bank has been involved with many large transactions with India, including the Essar group bankruptcy.

The Indian government remain determined to go ahead with the S-400 deal. The threat of sanctions under Countering America’s Adversaries Through Sanctions Act (CAATSA) would not scare New Delhi from dealing with Russia. India has been alternatively engaged in trade with America including the purchase of air defence missiles for New Delhi, weaponised drones and naval aircraft.

India has played the perfect diplomatic game by engaging with both sides for self-serving needs that would help India garner a better national standing and international repute.