How India Plans To Pay Russia For Weapons Purchases Amid Western Sanctions

India is planning different routes to clear Rs 28,000 crore dues against weapons delivered by Russia, reported the Indian Express.

Since the Russia-Ukraine war started on 24 February 2022, the western countries have put economic sanctions on Russia. 

It was reported that the Russian foreign reserves were frozen and some Russian banks were thrown out from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) interbank network.

These sanctions on Russia have made it difficult for India to make payments for its weapon purchases from Russia.

In total, payments worth Rs 28,000 crore have been stuck.

The impact of these sanctions can also be felt in the delivery schedule of the weapons bought by India.

There were reports that S-400 Surface to Air Missile delivery might be delayed by at least a few months.

However, Russia's Ambassador to India, Denis Alipov has insisted that the delivery of the S-400 is going as per schedule.

The impact could also be felt on India’s defence spnding. Only about 52 per cent of the allocated budget for 2022-23 was spent by the three services till 1 February this year.

According to a report in the Indian Express report, New Delhi is planning to find alternative ways to complete the payments, one of which is to pay Russia in currencies of third countries.

The two options that are being considered are the Chinese Yuan and Emirati Dirham (UAE), the report points out.

“India has apprehensions because of the sensitive nature of most defence deals. We are exploring the Dirham option but there is less comfort with the Yuan option”, the report quoted an official. 

Another option that is being discussed is of making payments in Rouble through a hybrid form of sovereign bonds — a debt instrument issued by the government — in which the government will commit to paying the fixed amount later, inclusive of face value and interest. 

A further third option is being considered, where some stakes might be given to Russia in Indian government owned enterprises, which can be liquidated in the future.

Some of the equipment that India needs to make payments for are the S-400 Surface to Air missile, Tushil class frigates, Kh-31 Anti-radiation missiles and Smerch Rocket artillery.