India and Russia have agreed on a new payment method through their national currencies for multi-billion-dollar defense deals, in a bid to avoid risks created by the U.S. threat of sanctions and banking restrictions.
Settlements in rubles and rupees are designed specifically to allow Moscow and Delhi to skirt the Countering America’s Adversaries Through Sanctions Act (CAATSA) — a 2017 US legislative measure designed to slap severe restrictions on Russia’s ability to sell arms abroad.
Delivery of the S-400 to India is planned to start after 2020 and “issues with payment have been resolved,” the Russian Federal Service for Military-Technical Cooperation said last month, according to the state-run Tass news service.
The U.S. has been pushing New Delhi, unsuccessfully so far, to cancel a more than $5 billion contract to buy Russian advanced S-400 air-defense missile systems, brandishing the threat of punitive measures.
India’s S-400 deal signed in October is among agreements with Russia that are cumulatively worth $10 billion. They include joint production of Kamov Ka-226T helicopters worth $1 billion, and four warships for the Indian Navy, with two of the vessels built in Russia and two at a shipyard in India under a technology-transfer agreement.
The Indian Prime Minister Narendra Modi in March inaugurated a rifle plant in Amethi that will produce 750,000 Kalashnikov AK-203 rifles under a joint venture between India and Russia.
The US has warned that India may be slapped with CAATSA sanctions over Delhi’s arms deals with Russia, but has yet to make good on its threats. Along with India, Washington has repeatedly threatened Turkey over its decision to buy Russia’s S-400s, saying the $2.5 billion arms deal could result in sanctions, or the scraping of the US-Turkish F-35 deal.
Russia and India are major defence partners, with 58 percent of Indian arms imports between 2014 and 2018 sourced in Russia.