As the war in Ukraine stretches over four months with no end in sight, it has given rise to apprehensions on Russia’s ability to adhere to timely deliveries of spares and hardware to India.

History of the bilateral defence ties

• India was reliant, almost solely on the British, and other Western nations for its arms imports immediately after Independence.
• However, this dependence weaned, and by the 1970s India was importing several weapons systems from then USSR, making it the country’s largest defence importer for decades.

A major chunk of India’s strategic arms

• Russia has provided some of the most sensitive and important weapons platforms that India has required from time to time including nuclear submarines, aircraft carriers, tanks, guns, fighter jets, and missiles.
• According to one estimate, the share of Russian-origin weapons and platforms across Indian armed forces is as high as 85%.
• Russia is the second-largest arms exporter in the world, following only the United States.
• For Russia, India is the largest importer, and for India, Russia is the largest exporter when it comes to arms transfer.

What saw the decline?

• Between 2000 and 2020, Russia accounted for 66.5% of India’s arms imports.
• Russia’s share in Indian arms imports was down to about 50% between 2016 and 2020, but it still remained the largest single importer.

Present status of defence cooperation

• When the war began, Indian armed forces had stocks of spares and supplies for eight to ten months and the expectation was that the war would end quickly.
• However, as it stretches on with no clear endgame, there are apprehensions on Russia’s ability to adhere to the timelines for both spares as well as new deliveries.
• Armed forces are looking at certain alternative mitigation measures and identifying alternate sources from friendly foreign countries.
• However, in the long term, this is also an opportunity for the private industry to step up production and meet the requirements.

Impact of the war

• While some timeline lapses and shipping delays were possible, there would not be any dent on the Army’s operational preparedness along the borders.
• In addition, the armed forces have also made significant emergency procurements since the standoff in Eastern Ladakh and have stocked up on spares and ammunition.
• However, Russia has assured India that it would adhere to delivery timelines.
• Since the war sees no end, Russian industry would be caught up in replenishing the inventories of their own armed forces.

What is the status of deals underway/new deals pending with Russia?

• The defence trade between India and Russia has crossed $15 billion since 2018, in the backdrop of some big deals including the $5.43 billion S-400 long range air defence systems.
• Other major contracts currently under implementation are construction of four additional stealth frigates in Russia and India,
• There is a licensed production of the Mango Armor-piercing fin-stabilised discarding sabot (APFSDS) rounds for the T-90S tanks as also additional T-90S tanks, AK-203 assault rifles among others.

Deferred deals in downtime

• There are several big deals deferred by the Defence Ministry as part of the review of all direct import deals.
• This is in conjunction with efforts to push the ‘Make in India’ scheme in defence.
• Russian deals have also been deferred including the one for 21 MiG-29 fighter jets for the Indian Air Force (IAF) along with the upgradation of 59 existing Mig-29 jets.
• This also includes the deferment of the manufacture of 12 SU-30 MKI aircraft by Hindustan Aeronautics Limited (HAL).

What is the status of payments?

• While India continues to remain Russia’s largest arms buyer with a major chunk of legacy hardware from Russia and the Soviet Union, the volume of imports has reduced in the last decade.
• With Russia being shut out of the global SWIFT system for money transfers, India and Russia have agreed to conduct payments through the Rupee-Rouble arrangement.
• With several big ticket deals including the S-400 under implementation, there are large volume of payments to be made.

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The government has convened a multi-Ministerial group to look into how to overcome challenges in trade with Russia, including managing payments for exporters and importers.

Recent course of updates

• Many parliamentarians have raised concerns over India’s abstentions at the United Nations and the impact of Indian policy on India’s trade and ties with the US.
• Developments indicate a possible revival of “rupee-rouble trade” in the wake of economic sanctions against Russian banks and entities by more than 40 US and European allies.
• India’s position has been “steadfast and consistent”, and India has repeatedly called for the immediate cessation of violence and end to all hostilities.

Gearing-up for a ‘Shaky’ response

• FM responded to a question over India’s support on sanctions being “somewhat shaky” amongst Quad partners.
• Leaders asked whether there would be any “negative impact” on India’s relations with its closest allies.

India’s clear stance

• Indian foreign policy decisions are made in Indian national interest and we are guided by our thinking, our views and our interests.
• So, there is no question of linking the Ukraine situation to issues of trade, the FM clarified.

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With tensions escalating between Russia and the West over the Ukraine crisis, India, which has major defence cooperation with Moscow and Kyiv, faces uncertainty over timely deliveries of the S-400.

About S-400

• The S-400 is known as Russia’s most advanced long-range surface-to-air missile defence system, capable of destroying hostile strategic bombers, jets, missiles and drones at a range of 380-km.

US reservations against S-400 purchase

• The US has made it clear that the delivery of the five S-400 systems is considered a “significant transaction”.
• Such deals are considered under its Countering America’s Adversaries Through Sanctions Act (CAATSA) of 2017.
• It could trigger sanctions against Indian officials and the Government.

About CAATSA

• The CAATSA is designed to ensure that no country is able to increase military engagement with Iran, North Korea and Russia without facing deterrent punitive action from the US.
• The sanctions are unilateral, and not part of any United Nations decision, and therefore no country is bound to accept them.
• Section 231 says the President shall impose no fewer than five different sanctions on any Government that enters into a significant defence or intelligence deal with Russia.
• Section 235 lists 12 options, including stopping credit lines from US and international banks such as the IMF, blocking sales of licensed goods and technology, banning banks, manufacturers and suppliers, property transactions and even financial and visa sanctions on specific officials.
• However, the law also empowers the President to waiver sanctions or delay them if the waiver is in the US’s “vital national security interests”.

Has the US used CAATSA before for S-400 sales?

• The US has already placed sanctions on China and Turkey for purchase of the S-400.
• The sanctions included denial of export licences, ban on foreign exchange transactions, blocking of all property and interests in property within the US jurisdiction and a visa ban.

Types of sanctions laid

• In 2020, the US sanctioned its NATO partner Turkey, which it had warned about CAATSA sanctions for years, besides cancelling a deal to sell Ankara F-35 jets.
• The sanctions on Turkey’s main defence procurement agency, also included a ban on licences and loans, and blocking of credit and visas to related officials.

Likely impacts after India’s purchase

• The Biden administration has no firm indication on where it leans on India’s case.
• However, several senators (US parliamentarians) have called upon the Biden administration to consider a special waiver for India.
• This is on account of India’s importance as a defence partner, and as a strategic partner on US concerns over China and in the Quad.
• Other US leaders thinks that giving a waiver to India would be the wrong signal for others seeking to go ahead with similar deals.

India’s dependence on Russia

• While Russia has been a traditional military supplier sharing platforms and technologies that others would not, the cooperation has further deepened in recent years.
• The defence trade between the two countries has crossed $15 billion since 2018.
• Even today, over 60% of Indian military inventory is of Russian origin, especially with respect to fighter jets, tanks, helicopters and submarines among others, while several deals are in the pipeline.

Why is the S-400 deal so important to India?

• Security paradigm: S-400 is very important for India’s national security considerations due to the threats from China, Pakistan and now Afghanistan.
• Air defence capability: The system will also offset the air defence capability gaps due to the IAF’s dwindling fighter squadron strength.
• Russian legacy: Integrating the S-400 will be much easier as India has a large number of legacy Russian air defence systems.
• Strategic autonomy: For both political as well as operational reasons, the deal is at a point of no return.

Conclusion

• The deal is a way for the Government to assert its strategic autonomy.
• India had earlier agreed to stop buying Iranian oil over the threat of sanctions in 2019, a move that caused India both financial and reputational damage.
• Not giving in to the US’s unilateral sanctions would be one way to restore some of that.

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Context

Late last week, India abstained from a United Nations Security Council (UNSC) resolution which called for condemning the Russian military action against Ukraine.

Understanding India’s position on the Ukraine issue

•  New Delhi has taken a subtle pro-Moscow position on the question of Russian attacks against Ukraine.
• A geopolitical necessity: India’s Russia tilt should be seen not just as a product of its time-tested friendship with Moscow but also as a geopolitical necessity.
• There are understandable reasons for India’s (subtle) pro-Russia position: an aggressive Russia is a problem for the U.S. and the West, not for India.
•  North Atlantic Treaty Organization (NATO) expansion is Russia’s problem, not India’s.
• China problem: India’s problem is China, and it needs both the U.S./the West and Russia to deal with the “China problem”.
• Neighbouring China as the rising superpower and Russia as its strategic ally challenging the U.S.-led global order at a time when China has time and again acted on its aggressive intentions vis-à-vis India, and when India is closest to the U.S. than ever before in its history, throws up a unique and unprecedented challenge for India.
• There is an emerging dualism in contemporary Indian strategic Weltanschauung: the predicament of a continental space that is reeling under immense pressure from China, Pakistan and Taliban-led Afghanistan adding to its strategic claustrophobia; and, the emergence of a maritime sphere which presents an opportunity to break out of the same.

Why India needs to balance relations with Russia and the US

• Relations with Russia to manage continental challenges: New Delhi needs Moscow’s assistance to manage its continental difficulties be it through defence supplies, helping it ‘return’ to central Asia, working together at the Shanghai Cooperation Organization (SCO) or exploring opportunities for collaboration in Afghanistan.
• Relations with US to manage maritime challenges: When it comes to the vast maritime sphere, the Indo-Pacific to be precise, Russia is not of great consequence to India.
• That is where its American and western partners come into play. India is simply not in a position to address the China challenge in the maritime space without the active support of American and western navies and, of course, the Quad.
• This unavoidable dualism in the contemporary Indian strategic landscape necessitates that India balances the two sides.

Implications of war on Ukraine for India

• 1] It will embolden China: Russian action in Ukraine dismissing the concerns of the rest of the international community including the U.S. will no doubt embolden China and its territorial ambitions.
• 2] Sanctions on Russia will impact India’s defence cooperation: The new sanctions regime may have implications for India’s defence cooperation with Moscow.
• 3] Russia-China axis: The longer the standoff lasts, the closer China and Russia could become, which certainly does not help India.
• 4] Focus will move away from Indo-Pacific: The more severe the U.S.-Russia rivalry becomes, the less focus there would be on the Indo-Pacific and China, which is where India’s interests lie.

Foreign policy challenge for India

• Position of geopolitical vulnerability: India’s responses to the Russian aggression on Ukraine underline the fact that India is operating from a position of geopolitical vulnerability.
• Going forward, India’s ability to be a “swing state”, “major power” or a “leading power” stands diminished.
• There will be more middle-of-the-road behaviour from New Delhi rather than resolute positions on global strategic developments.
• Interests over principles: India’s position also shows the unmistakable indication that when it comes to geopolitics, New Delhi will choose interests over principles.
• A careful reading of India’s statements and positions taken over the past few days also demonstrates a certain amount of discomfort in having to choose interests over principles.
• There is perhaps a realisation in New Delhi that a dog-eat-dog world, where rules and good behaviour do not matter, does not help India in the long run either.
• Mastering the art of balancing extremes: Going forward, if tensions between Russia and the West persist, balancing extremes will be a key feature of Indian diplomacy.
• Even though New Delhi abstained from voting on it (thereby siding with Moscow), it made its unhappiness about the Russian action clear in the written note.
• Sticking to the principle of strategic autonomy: New Delhi’s response to the recent crisis, especially its “explanation of vote” at the UNSC indicates a careful recourse to the principle of strategic autonomy: India will make caveated statements and will not be pressured by either party.

Conclusion

India’s indirect support to the Russian position is not a product of Russian pressure but the result of a desire to safeguard its own interests.

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The U.S., Europe and several other western nations are moving to exclude Russia from SWIFT, an international network for banks worldwide to facilitate smooth money transactions globally.

What is SWIFT?

• SWIFT is an international network for banks worldwide to facilitate smooth money transactions globally.
• It is basically a messaging network used by banks and financial institutions globally for quick and faultless exchange of information pertaining to financial transactions.
• The Belgium-headquartered SWIFT connects more than 11,000 banking and securities organizations in over 200 countries and territories.
• First used in 1973, it went live in 1977 with 518 institutions from 22 countries, its website states.

What exactly is it?

• SWIFT is merely a platform that sends messages and does not hold any securities or money.
• It facilitates standardized and reliable communication to facilitate the transaction.

How does it facilitate banking?

• Each participant on the platform is assigned a unique eight-digit SWIFT code or a bank identification code (BIC).
• If a person, say, in New York with a Citibank account, wants to send money to someone with an HSBC account in London, the payee would have to submit to his bank the London-based beneficiary’s account number along with the eight-digit SWIFT code of the latter’s bank.
• Citibank would then send a SWIFT message to HSBC. Once that is received and approved, the money would be credited to the required account.

How is the organization governed?

• SWIFT claims to be neutral. Its shareholders, consisting of 3,500 firms across the globe, elect the 25-member board, which is responsible for oversight and management of the company.
• It is regulated by G-10 central banks from Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, the UK, the US, Switzerland, and Sweden, alongside the European Central Bank.
• Its lead overseer is the National Bank of Belgium.
• The SWIFT oversight forum was established in 2012.
• The G-10 participants were joined by the central banks of India, Australia, Russia, South Korea, Saudi Arabia, Singapore, South Africa, the Republic of Turkey, and the People’s Republic of China.
• Europe, Middle East, and Africa are highest contributors to SWIFT.

What happens if one is excluded from SWIFT?

• US excluding Russia from SWIFT could have serious repercussions on how Russian banks carry out international financial transactions.
• If a country is excluded from the most participatory financial facilitating platform, its foreign funding would take a hit, making it entirely reliant on domestic investors.
• This is particularly troublesome when institutional investors are constantly seeking new markets in newer territories.
• An alternative system would be cumbersome to build and even more difficult to integrate with an already expansive system.

Are any countries excluded from SWIFT?

• Iranian banks were ousted from the system in 2018 despite resistance from several countries in Europe.
• This step, while regrettable, was taken in the interest of the stability and integrity of the wider global financial system, and based on an assessment of the economic situation.

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The article highlights Russia’s increasing inclinations towards China and its implications for India.

Context

Russian President Vladimir Putin has recently asserted that both the Indian Prime Minister, Narendra Modi, and the Chinese President, Xi Jinping, are “responsible” enough to solve issues between their countries, while underlining the need to debar any “extra-regional power” to interfere in the process.

Implications for India-Russia ties

• By this remark, Russia expects India to give up all efforts to reverse Beijing’s encroachment strategies.
• The remarks can only be seen as reinforcing China’s claim that the Quadrilateral or Quad is aimed at containing China’s influence in the Indo-Pacific region.
• Russia’s continued criticism of the Indo-Pacific and the Quad suggests the divergent perspectives of India and Russia on how to deal with China’s rise to global prominence.
• While India needs Russia’s partnership for its defence needs, India cannot endorse the Russian perspective on the Indo-Pacific and the Quad
• The Russian attitude toward China’s growing power and influence will be the touchstone of Russia’s relations with India.
• Russia has rejected the Indo-Pacific construct in favour of the Asia-Pacific on the ground that the first is primarily an American initiative designed to contain both China and Russia.
• With the rise of populist nationalism amidst the decline of globalisation, the resolution of the Sino-Indian boundary dispute appears a difficult task.

Background of India’s balancing strategies

• Following the disintegration of the Union of Soviet Socialist Republics (USSR), India soon realised Russia was much weaker than the erstwhile USSR and incapable of helping India balance potential threats from Beijing. 
• On the other hand, Russia began to cast Moscow as the leader of a supposed trilateral grouping of Russia-India-China against a U.S.-led unipolar world.
• Russia became an early proponent of the ‘strategic triangle’ to bring together the three major powers.
• India’s fear of the unipolar moment too made it easier for India to become part of this initiative.
• But China’s dismissive attitude toward Indian capabilities, coupled with an emerging China-Pakistan nexus, prevented the success of this trilateral.
• India, instead, invested its diplomatic energies in rapprochement with the United States.
• Thus, India decided to get integrated in the economic order it once denounced.
• Economic liberalisation also allowed India to buy sophisticated weapons from a wider global market that included suppliers such as Israel and France.
• As the logic of intensive engagement with the West was effectively established, strategic partnership with the U.S. was a logical corollary.
• India has been searching for other major powers to balance against China as it does not have the sufficient means for hard balancing.
• India has deepened its ties with Japan and Australia in a way that is close to soft balancing. 
•  among all of India’s balancing efforts, the stupendous growth in ties with the U.S. has been the greatest source of concern for China which views the India-U.S. rapprochement as containment.

Way forward for India-Russia ties

• While other powers such as France, Australia, Japan and Russia will have an impact on the emerging maritime structures of the Indo-Pacific region, it is the triangular dynamic between India, China and the U.S. that is going to be the most consequential.
• Russia is yet to realise that it will gain immensely from the multilateralism that the Indo-Pacific seeks to promote.
• Being China’s junior partner only undermines Moscow’s great-power ambitions.
• Given Russia’s preoccupation with ‘status’ rivalry with the U.S., Russia’s view of India-China relations seems understandable.
• But there is a danger in permitting it to harden into a permanent attitude as an increasingly pro-Beijing Russia might adopt more aggressive blocking of India’s policy agendas.
• That is why India is particularly interested in a normalisation of relations between Washington and Moscow.
• The normalisation of relations between the U.S. and Russia will help India steer ties among the great powers.

India-China ties

• Non-alignment, painful memories of colonial subjugation, opposition to great-power hegemony, and strong beliefs in sovereignty and strategic autonomy have been the key influencers in shaping India’s and China’s engagement with each other as well as the western world.
•  But this has begun to change as Beijing is asserting its hegemony over Asia.
• In such circumstances, multilateral forums such as the Russia-India-China (RIC) grouping and BRICS (Brazil, Russia, India, China and South Africa) have little practical value for Indian diplomacy.
• Without China’s reciprocity, options before India are limited.
• The response cannot be just symbolic or rhetorical. The absence of any material evidence of reciprocity is bound to doom an attempt at Sino-Indian rapprochement.

Conclusion

China is undoubtedly the most powerful actor in its neighbourhood but it cannot simply have its way in shaping Asia’s new geopolitics.

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