Modi's India Busting Western Sanctions, Funding Russia's War On Ukraine

[Riaz Haq]

India, a western ally, is openly buying Russian coal, oil and weapons worth tens of billions of dollars at deep discounts. These actions amount to busting western sanctions and financing President Vladimir Putin's war on Ukraine. Many smaller developing countries, including Bangladesh and Pakistan, are abiding by these sanctions and suffering from the consequences in terms of high prices of fuel and food. Why these double standards? Do these policy contractions serve the broader US interests in the Asia region? 

India's Russian Imports Soaring Since the Start of Ukraine War. Source: Reuters

India's Russian coal imports are up 6-fold from May 27 to June 15, 2022, according to Reuters. Delhi's Russian oil buying has jumped 31-fold in this period.  Bulk shipments of Russian thermal coal to India began in the third week of May, 2022. 

India is defying western sanctions to buy millions of barrels of discounted Russian crude oil, hiding their origin and exporting refined petroleum products with a big markup to make a huge profit. China has yet to increase its oil imports from Russia, according to news reports. Meanwhile, India's neighbors Bangladesh and Pakistan are abiding by western sanctions and paying much higher market prices to buy oil for their domestic needs, and hurting their people. Such double standards are not going unnoticed. 

India's Refined Petroleum Exports.Source: MarketWatch

India is importing large amounts of deeply discounted Russian crude, running its refiners well above capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe, according to MarketWatch.  “As the EU weans from Russian refined products, we have a growing suspicion that India is becoming the de facto refining hub for Europe,” said Michael Tran, global energy strategist at RBC Capital Markets, in a Tuesday note. Here’s how the puzzle pieces fit together, according to Tran:

"India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months". 

Bangladesh and Pakistan are afraid to buy Russian oil for fear of western sanctions while American ally India feels free to do so.  Pakistan's Imran Khan sought to buy Russian oil and gas before he was removed from power in early April. Pakistani Finance Minister Miftah Ismail told CNN's Becky Anderson in a recent interview, “It is very difficult for me to imagine buying Russian oil. At this point I think that it would not be possible for Pakistani banks to open LCs or arrange to buy Russian oil". Similarly, Bangladeshi foreign minister AK Abdul Momen said, “Russia has offered to sell oil and wheat to us, but we can’t do it out of fears of sanctions. We asked [India] how they did it [import oil from Russia]. They [India] said they have found some tricks,” Momen added. 

The West, particularly the United States, is turning a blind eye to India's actions when it comes to busting sanctions on Russia. Indian Prime Minister Narendra Modi is openly funding the war in Ukraine by buying weapons and energy from Russia. At the same time, India's smaller neighbors feel intimidated by the threat of western sanctions if they follow Modi's example. Such double standards are not going unnoticed. 

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[Riaz Haq]

What lies behind arms talks between India’s Modi and Russia’s Putin?

https://www.aljazeera.com/news/2024/7/9/what-lies-behind-arms-talks...

Russia and India have a long history of collaborating on defence. What weapons have they traded before, and what will they discuss this time?


India’s prime minister, Narendra Modi, is making his first visit to Russia since the invasion of Ukraine to discuss issues that include defence and weapons deals.

The details of any new arms deals to be struck between the two countries have yet to emerge, but it is understood that Russia’s need for weapons and ammunition for the war in Ukraine is driving talks. Modi is able to offer substantial Indian industrial support to Russia for the Ukraine war in exchange for energy and military technology. The support would be practical but would stop short of India publicly backing Russia’s war effort.

What is the history of India-Russia defence deals?
For the past decade, India has focused on boosting its own military-industrial complex, telling international defence contractors that “Made in India” is a priority and saying technology transfers to Indian companies are a core part of any deal, whether with Russia or somewhere else.

However, India’s armed forces still rely heavily on armoured divisions and 97 percent of its 3,740 tanks are Russian-made.

While India has tried to diversify its defence purchases and partially wean itself off Russian arms, it is mainly Russian companies that are helping India’s defence industries mature at a rapid rate.

A day before Modi left for Moscow this week, Russia’s state export company, Rostec, signed an agreement to manufacture advanced armour-piercing “Mango” tank shells in India for the T-90 tank.

How else have India and Russia cooperated on defence before now?
Their defence cooperation has been substantial. The Brahmos supersonic antiship missile, for instance, was jointly designed by Indian and Russian engineers for the Indian armed forces and first tested in 2001.

Brahmos is the merger of the names of the Brahmaputra and Moskva rivers, signifying the cooperation between the two countries. The missile is fast and powerful and can deliver a 300kg (660lb) warhead at three times the speed of sound with an accuracy down to less than a single metre (3.3ft). It has since been exported to the Philippines.

Russian joint ventures with India also include making 35,000 Kalashnikov AK203 assault rifles for the Indian army, the licensed production of advanced T-90 tanks and Sukhoi Su-30-MKI fourth-generation fighter jets and maintenance facilities for India’s MiG-29 fighter jets. They also collaborate on making the Konkurs antitank guided missile.

What else will Modi and Putin discuss?
Cheap Russian oil has been a mainstay of India’s economy for more than a year. It has been a major recipient of US- and EU-sanctions-busting petroleum shipments.

Nuclear power is also on the cards at the talks in Moscow. Several of India’s nuclear reactors are Russian-built, and talks are ongoing for India to buy both Russian floating and maritime nuclear reactors, useful for remote areas and also for submarines and larger, longer-range naval vessels.

Where will Russia source weapons it needs for war in Ukraine?
Moscow is desperate to fulfil its armed forces’ constant demand for artillery and tank ammunition of all types for its war in Ukraine.

Russia’s armed forces conservatively fire 8,000 rounds per day. At an average cost of $4,000 each, Russia is spending $32 million every single day in its effort to break the deadlock on Ukraine’s battlefields.

[Riaz Haq]

What lies behind arms talks between India’s Modi and Russia’s Putin?

https://www.aljazeera.com/news/2024/7/9/what-lies-behind-arms-talks...

Russia and India have a long history of collaborating on defence. What weapons have they traded before, and what will they discuss this time?

While Russia’s economy is technically on a war footing, Putin has still needed to court North Korea and Vietnam, both operators of Russian-calibre artillery, and both with large domestic munitions factories, especially for the much-needed 152mm shell.

With continued support for Ukraine being questioned in the United States and European and Turkish munitions factories picking up the slack, Ukraine and Russia are now increasingly reliant on other countries for help in providing the vast amounts of ammunition needed to keep the other at bay.

Both countries are seeking new partners in the hopes of outproducing the other and bringing the intense firepower they think is needed to turn the tide in what has become a static conflict. Russia is hoping that, along with North Korea and Vietnam, Indian industry can help provide Russia with the tools it needs to defeat Ukraine.

[Riaz Haq]

Russia built covert trade channel with India, leaks reveal

Files outline Moscow’s plan to spend rupees from oil sales on sensitive electronics for war effort


https://www.ft.com/content/101afcd6-8e6f-4b5f-89b0-98f48cd5d119

Russia has been secretly acquiring sensitive goods in India and explored building facilities in the country to secure components for its war effort, according to Russian state correspondence seen by the Financial Times. Moscow’s industry and trade ministry, which oversees defence production to support Vladimir Putin’s full-scale invasion of Ukraine, drew up confidential plans in October 2022 to spend about Rs82bn ($1bn at the time) on securing critical electronics through channels hidden from western governments. The plan, revealed in letters to a shadowy trade promotion body with strong links to the Russian security services, aimed to use “significant reserves” of rupees amassed by Russian banks from booming oil sales to India. It saw India as an alternative market to source crucial goods “previously supplied from unfriendly countries”. Russia and its Indian partners targeted dual-use technologies — goods with both civilian and military applications — that are subject to western export controls, according to the documents, as well as western officials and two businessmen formerly involved in the trade. Moscow even envisaged pumping investment into Russo-Indian electronics development and production facilities, according to the leaked files. The correspondence shows how Russia turned to New Delhi, even as Narendra Modi, the prime minister, brought the world’s most populous country closer than ever into the US orbit. During a state visit to Washington last year Modi signed a series of Indo-American co-operation agreements in areas ranging from advanced jet engines to artificial intelligence. Narendra Modi, right, follows Vladimir Putin in to the Grand Hall of the Kremlin during their bilateral meeting in July © Getty Images While the extent to which Moscow enacted its plan is unclear, detailed trade flow data suggest the relationship with India has grown deeper in the specific categories of goods identified in the Russian correspondence. India’s ties with Moscow have been a growing source of friction with Washington. Wally Adeyemo, the US deputy treasury secretary, wrote in July to three of India’s top business organisations warning them that “any foreign financial institution that does business with Russia’s military industrial base risks being sanctioned itself”. Adeyemo added: “This heightened sanctions risk exists regardless of the currency used in a transaction.” While Modi has bemoaned the impact on developing economies of the invasion of Ukraine and urged the two sides to make peace, Delhi extended an economic lifeline to Russia after it was hit by western sanctions. India has been a major buyer of Russian crude oil and the two countries’ total trade reached an all-time high of $66bn in the 2023-24 financial year, a fivefold increase on the past year before the invasion. Some of the trade has been transacted in rupees, leaving Russia with a surplus of the currency. The Kremlin has admitted difficulties in repatriating Russia’s oil profits because of US sanctions and currency restrictions. Russian groups have used rupees to trade gold and purchase goods to evade the sanctions, according to people involved in the trade and western officials.

[Riaz Haq]

Russia built covert trade channel with India, leaks reveal

Files outline Moscow’s plan to spend rupees from oil sales on sensitive electronics for war effort


https://www.ft.com/content/101afcd6-8e6f-4b5f-89b0-98f48cd5d119

The Russian central government official involved in the leaked correspondence, Alexander Gaponov, is deputy head of the ministry’s “radio-electronics” division. It is an area of particular sensitivity because Russia is reliant on foreign-produced electronics for use in missiles, drones and electronic warfare. Gaponov in October 2022 asked an opaque Moscow-based organisation with ties to Russian security services — the Consortium for Foreign Economic Activity and International Interstate Cooperation in Industry — to present plans for acquiring critical components from India. Vadim Poida, the consortium’s president, replied that it had developed “specific plans” with the Russian electronics industry and “representatives of the relevant Indian state and private businesses” that had “high potential” for making use of the Kremlin’s rupees. Poida outlined a five-stage plan to help Russia spend its rupees and establish a steady supply of dual-use components. Russia would set up a “closed payment system between Russian and Indian companies” beyond the oversight of western countries, “including by using digital financial assets”, Poida wrote. Poida’s consortium estimated Russia could purchase up to Rbs100bn of components, including parts for “telecommunication, server, and other complex electronic equipment” previously bought through western countries. Its members, Poida wrote, had begun pilot projects for producing Russian-designed components in India and conducted “detailed work on the issue of hiding information about the participation of Russian individuals and corporate entities, as well as the logistics of supply via third countries”. Additional funds could be spent on backing joint ventures in India for electronics factories needed “to meet the needs of Russian critical information infrastructure”. The consortium’s legal entity was set up in 2013, nominally as a vehicle for app development. Poida took it over and renamed it in March of 2022, less than a month after Putin ordered the full-scale invasion of Ukraine. One western official confirmed the group, which mentions meetings involving the security services in the leaked correspondence, is a front for Russian intelligence. The leaked exchange of letters mentions paying for two specific customs categories of goods, types of electronics and machinery, in rupees. Russian filings show that trade in these categories has soared from negligible volumes in mid-2022. Customs filings also reveal specific items that potentially match the project’s activities. Innovio Ventures, an Indian company, was listed in trade declarations as the supplier of at least $4.9mn of electronic equipment, including drones, to Russia as well as $600,000 of goods shipped to Kyrgyzstan. The transactions were listed in Russian filings as settled in rupees. The shipments to Russia include $568,000 of electronic equipment for use in radio-electronic systems to a Russian company called Testkomplekt, which has been hit by US and EU sanctions for being at the heart of Moscow’s military procurement system. An Indian businessman familiar with Russia’s trade with India said Moscow had also done scoping work to establish facilities in India. “Part of this [rupee pile] was to be deployed in India for coming up with the necessary manufacturing of dual-use items,” the Indian businessman said. “It could be low-value electronics items like the ones found in washing machines or refrigerators.” “You could either export these items, or take the electronics out and send them to Russia,” he added.

[Riaz Haq]

The most recent data means almost a fifth of the sensitive technology that goes into Russia’s military-industrial complex got there via India, the officials said.

A key driver of the shift is the vast stock of rupees Russia has accumulated from oil sales, according to the officials.

India’s role as a transshipment point has made it a focus for European Union and US sanctions agencies in recent months. Officials from those nations have visited several times in efforts to get authorities to crack down on shipments, and several Indian firms have come under western sanctions.


https://www.livemint.com/economy/india-is-now-russia-s-no-2-supplie...

India has surged to become the second-biggest supplier of restricted critical technologies to Russia, US and European officials said, highlighting the challenge in efforts to choke off exports fueling President Vladimir Putin’s war machine.

Indian exports of restricted items such as microchips, circuits and machine tools surpassed $60 million in both April and May, about double from earlier months this year, and leaped to $95 million in July, according to the officials, who asked not to be identified discussing private assessments. India is exceeded only by China.

Even more frustrating to Ukraine’s allies, some of them said, is that envoys who raise the issue have received little response from their Indian counterparts. India’s Ministry of External Affairs declined to comment when asked about the trend.

The most recent data means almost a fifth of the sensitive technology that goes into Russia’s military-industrial complex got there via India, the officials said.


The fresh data underscores the difficulty the US and its allies have faced in crimping Russia’s ability to fight in Ukraine two and a half years since Putin’s forces invaded. Exports of most such dual-use items directly to Russia are banned, so the country has taken to buying them from third countries — sometimes from unwitting subsidiaries of western firms or networks of intermediaries.

A State Department spokesperson said Friday that the department would reiterate rising concerns with Indian government officials as well as companies.

The US and European Union have focused most of their efforts on a list of technologies found in Russian weapons or are needed to build them.

As allies work to curb some of these routes — Turkey and the United Arab Emirates have been two big transshipment points — new hubs have emerged. They include India, Malaysia and Thailand, according to the people.

India’s role in the the shipment of such goods has presented a further challenge because US and EU policymakers want to nurture partnerships with Prime Minister Narendra Modi’s government even as he cultivates ties with Putin. India has also emerged as a top buyer of Russian oil despite allied efforts to restrict sales.

A key driver of the shift is the vast stock of rupees Russia has accumulated from such oil sales, according to the officials.
India’s role as a transshipment point has made it a focus for European Union and US sanctions agencies in recent months. Officials from those nations have visited several times in efforts to get authorities to crack down on shipments, and several Indian firms have come under western sanctions.

In July, US Deputy Treasury Secretary Wally Adeyemo wrote a letter to senior officials at the Confederation of Indian Industry warning of the sanctions risks faced by Indian companies and banks that do business with Russia’s military industrial base, according to a copy of the letter obtained by Bloomberg News.