Russia - India Cooperation against the Background of Sanctions: Adverse Effects and New Opportunities
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POLICY BRIEF
Russia – India Cooperation
against the Background
of Sanctions: Adverse Effects
and New Opportunities
Alexey Kupriyanov,
Ph.D. in History, Research Fellow of the Primakov Institute of the World Economy and International
Relations of RAS, RIAC Expert
Amit Bhandari,
Fellow of Energy and Environment Studies at Gateway House
Chaitanya Giri,
Ph.D. in Chemistry, Fellow of Space and Ocean Studies at Gateway House
Kunal Kulkarni,
Senior Researcher at Gateway House
№ 19, September 2018
1RUSSIAN INTERNATIONAL AFFAIRS COUNCIL
BOARD OF TRUSTEES PRESIDIUM
Sergey Lavrov – Chairman Mikhail Margelov Petr Aven
of the Board of Trustees Yury Osipov Igor Ivanov – President
Herman Gref Sergey Prikhodko Andrey Kortunov – Director General
Aleksandr Dzasokhov Anatoly Torkunov Fyodor Lukyanov
Leonid Drachevsky Andrey Fursenko Igor Morgulov
Aleksandr Dynkin Aleksandr Shokhin Dmitry Peskov
Mikhail Komissar Igor Yurgens
Konstantin Kosachev
Editors:
Ivan Timofeev, Ph.D. in Political Science
Timur Makhmutov, Ph.D. in Political Science
Ksenia Kuzmina
Alevtina Larionova
Russian International Affairs Council (RIAC) is a membership-based non-profit Russian organization.
RIAC’s activities are aimed at strengthening peace, friendship and solidarity between peoples, preventing
international conflicts and promoting crisis resolution. The Council was founded in accordance with
Russian Presidential Order No. 59-rp ”On the Creation of the Russian International Affairs Council non-
profit partnership,” dated February 2, 2010.
FOUNDERS
Ministry of Foreign Affairs of the Russian Federation
Ministry of Education and Science of the Russian Federation
Russian Academy of Sciences
Russian Union of Industrialists and Entrepreneurs
Interfax News Agency
RIAC MISSION
The mission of RIAC is to promote Russia’s prosperity by integrating it into the global world. RIAC operates as a
link between the state, scholarly community, business and civil society in an effort to find solutions to foreign
policy issues.
The views expressed herein do not necessarily reflect those of RIAC.
2Russian International Affairs Council
Gateway House
GATEWAY HOUSE: INDIAN COUNCIL ON GLOBAL RELATIONS
EXECUTIVE BOARD ADVISORY BOARD
Neelam Deo Ishaat Hussain Luis Miranda
Rajeev Dubey Satish Kamat K.N. Vaidyanathan
Blaise Fernandes Manjeet Kripalani Sunit Welling
Amay Hattangadi Bahram Vakil
Editor:
Nandini Bhaskaran
Consulting Editor:
Christopher Conte
Content Coordinator:
Aashna Agarwal
Gateway House: Indian Council on Global Relations is a foreign policy think tank that is based in
Mumbai, India. It is an independent, non-partisan and membership-based organisation, established
in 2009 to engage India’s leading corporations and individuals in debate and scholarship on India’s
foreign policy and the nation’s role in global affairs.
FOUNDER MEMBERS
Mahindra Group
T.V. Mohandas Pai
Suzlon Energy
Rakesh Jhunjhunwala
TVS Motor Co. Ltd.
GATEWAY HOUSE’S MISSION
Gateway House’s mission is to raise public awareness and stimulate public debate among Indians
on the foreign policy changes that face India, and make policy recommendations, based on serious
scholarship in international affairs. Its goal is to engage Indian business and opinion leaders in
dialogue on foreign policy issues and groom the next generation of foreign policy leaders from India.
Its aim is to have a diverse, select membership with a genuine interest in foreign policy.
AREAS OF STUDY
• Geopolitics
• Geoeconomics
• Multilaterals and Bilaterals
• Democracy and Nation Building
• National Security
• Science, Technology and Innovation
• Energy and Environment
3Alexey Kupriyanov
Impact of the U.S. Anti-Russian Sanctions on the Russia– India Cooperation in the Military-Technical Area
Russia – India Cooperation against the
Background of Sanctions: Adverse
Effects and New Opportunities
Impact of the U.S. Anti-Russian Sanctions on the Russia–
India Cooperation in the Military-Technical Area
Before the United States introduced sanctions measures being introduced against these banks,
against the Russian defence sector, military- and this would significantly complicate their
technical cooperation between Moscow and operations.
New Delhi had been progressing steadily. Even
The Indian government while anticipating this
though Russia lost a significant share of the
problem adopted a decision at the end of May
Indian defence market after the collapse of the
2017 to introduce a temporary exemption for
USSR in 1991, it was nevertheless able to partially
weaponry deals that had already been con-
restore its positions from 2000 onwards. At the
cluded with Russia.3 For such agreements, it is
BRICS Summit in Goa in October 2016, Prime
no longer required that Indian banks guarantee
Minister of India Narendra Modi and President
funds for the purchases as the sovereign guar-
of the Russian Federation Vladimir Putin reached
antees provided by Russia now suffice. Precisely
an agreement on the delivery of Russian S-400
which contracts were covered by this decision is
Triumf anti-aircraft systems to India, the creation
unclear.
of a joint venture to produce Ка-226 helicopters
and the construction of four frigates under Proj- However, the Indian authorities did not consider
ect 1135.6 for India. Negotiations were also held the possible expansion of the sanctions and were
in other areas of cooperation.1 unable to protect the country’s banks from puni-
tive measures in time. In April 2018, the sanctions
In January 2017, the bill Countering America’s imposed in 2017 were extended to include Con-
Adversaries Through Sanctions Act (CAATSA), cern VKO “Almaz-Antey” (which produces the
imposing restrictions on banks that carry out S-400 systems), the United Shipbuilding Corpo-
operations with individuals and legal entities ration (which is delivering the frigates), Russian
under sanctions, was introduced in the United Helicopters and Rosoboronexport,4 thus placing
States Congress.2 CAATSA caused concerns in all military-technical contracts between Russia
India: according to Indian legislation, domestic and India in jeopardy. This leads to Indian banks
banks must allocate funds to guarantee the sup- freezing5 approximately $100 billion intended for
ply of defence purchases made abroad. Given the contracts with Russia. As a result, the possibil-
the strong ties that Indian banks enjoy with the ity for delays in the delivery of weapons under
American financial sector, as well as their gen- the contracts that had already been concluded
eral involvement in the global financial system, arose, prompting the Indian and Russian sides to
providing such guarantees to Russian enterprises set up urgent consultations to find a way out of
that are under sanctions would lead to restrictive the situation.
ABOUT THE AUTHOR:
Alexey Kupriyanov, Ph.D. in History, Research Fellow of the Primakov Institute of the World Economy and International Relations of RAS,
RIAC Expert
1
Russia and India Agreed on S-400 Delivery and Ka-226 Production // Lenta.ru, October 15, 2016. URL: https://lenta.ru/news/2016/10/15/c400/ (In Russian).
2
Sec. 231. America’s Adversaries Through Sanctions Act (CAATSA) // Library of Congress, August 2, 2017.
URL: https://www.congress.gov/115/plaws/publ44/PLAW-115publ44.pdf
3
Before Modi’s Russia Visit India Gave Special Waiver to Russian Defence Entities // The Economic Times, July 15, 2017.
URL: https://economictimes.indiatimes.com/news/defence/before-modis-russia-visit-india-gave-special-waiver-to-russian-defence-entities/article-
show/58952664.cms
4
Laxman K Behera, G. Balachandran. Implications of CAATSA for India’s Defence Relations with Russia and America // Institute for Defense Studies and
Analysis, April 26, 2018. URL: https://idsa.in/issuebrief/caatsa-for-india-defence-relations-with-russia-america-lbehera-balachandran-260418
5
US Sanctions Rain on India-Russia Defence Parade // The Economic Times, May 5, 2018.
URL: https://economictimes.indiatimes.com/news/defence/us-sanctions-rain-on-india-russia-defence-parade/articleshow/64036673.cms
4Russian International Affairs Council
Gateway House
The approval and subsequent adoption of has also been critical of the policy. They proposed
CAATSA put the United States in an ambiguous including a provision in the National Defense
position. U.S. lawmakers tried to ensure that con- Authorization Act (NDAA-19) that releases these
sistent pressure was exerted on Russia, which countries from the purview of CAATSA.7 The
meant that they had to create the most hostile proposal was shut down by the members of Con-
environment for Russian companies. However, gress and the Senate. The text of the NDAA-19
countries that Washington wants to see as allies was revised during the hearings to include a pro-
were also attacked through this policy, spe- vision (Par. 1236)8 amending Sec. 231 of CAATSA.
cifically India, Indonesia and Vietnam. These The amendment states that the President of the
countries have been purchasing Soviet and United States has the right to suspend actions
Russian technology for years and are not in the against a given country for 180 days if that coun-
position to abandon this practice immediately. try is clearly working to reduce its trade ties with
The ideal solution for the United States would Russia in the military sphere. This clarification did
be to oust Russian manufacturers from these nothing to improve India’s position – the coun-
markets altogether and ensure these countries’ try’s leaders have repeatedly stated that New
transition to NATO standards. Delhi seeks a complete lifting of the sanctions
and has no intention of ceasing military-techni-
Indian experts and politicians have tried to
cal cooperation with Russia. Final wording of the
explain their predicament to the U.S. authori-
amendment stipulated that the President could
ties – that the country cannot drop its contracts
suspend actions against a given country for 180
for the supply of Russian weapons immedi-
days if it was in line with American foreign policy
ately even if it wanted to. Not to mention the
priorities. However, as the Pentagon’s Assistant
fact that India has no intention of doing so, as
Secretary of Defence for Asian and Pacific Secu-
it plans to continue its policy of diversifying its
rity Affairs Randall Schriver said, it does not mean
defence imports. By forcing India to abandon its
that the waiver will be used for future Indian
contracts, the United States is undermining the
purchases from Russia,9 since Washington is
country’s defence potential, which runs counter
interested in ending the strategic partnership
to the declared goal of turning India into a major
between Moscow and New Delhi.
player in Asia. What is more, the very tone of the
U.S. statements aroused the indignation of the Another source of tension in U.S.–India relations
Indian media, politicians and the expert commu- is linked to the restrictions imposed by the United
nity: an external state tried to force its interests States on the import of a number of commod-
on a country that plans to become a great power. ity items from India.10 These restrictions mostly
At the same time, Russian counter-sanctions do affect Indian ferrous and nonferrous metallurgy.
not harm third parties. New Delhi repeatedly In addition, the withdrawal of the United States
stressed that India would follow only the sanc- from the nuclear deal and the announcement
tions imposed by the United Nations. The Indian of sanctions against Tehran have jeopardised
authorities declared that they would continue to Indian infrastructure and energy projects in Iran.
purchase weapons from Russia, regardless of the
One way that Indian financial institutions could
position of the United States.
avoid sanctions from the United States would
U.S. Secretary of Defense James Mattis sup- be to consider abandoning the U.S. dollar for
ported New Delhi’s position, having stated at purchases of Russian weapons and switching to
Senate hearings that by forcing India, Vietnam settlements in roubles and rupees. The countries
and Indonesia to participate in the sanctions could use Singapore dollars for the transitions.
against Russia, Washington was actually “paralys- Another option could be to effect payments to
ing itself.”6 U.S. Secretary of State Mike Pompeo Russian companies that are not under the U.S.
6
Imposing Sanctions on India over Defence Deal with Russia Will Hit US: Jim Mattis // The Times of India, April 27, 2018. URL: https://timesofindia.indiatimes.
com/india/imposing-sanctions-on-india-over-defence-deal-with-russia-will-hit-us-jim-mattis/articleshow/63936894.cms
7
US Secretary of State Mike Pompeo Pushes for CAATSA Waiver so that Countries Like India Aren’t Affected // The Times of India, May 25, 2018.
URL: https://timesofindia.indiatimes.com/world/us/us-secretary-of-state-mike-pompeo-pushes-for-caatsa-waiver-so-that-countries-like-india-arent-
affected/articleshow/64317376.cms
8
National Defense Authorization Act for Fiscal Year 2019 // Document Repository, U.S. House of Representatives, May 15, 2018.
URL: https://docs.house.gov/billsthisweek/20180521/CRPT-115HRPT-676.pdf
9
CAATSA: Will India Receive Waiver from US’ Russia Sanctions? // The Hindu Business Line, August 30, 2018.
URL: https://www.thehindubusinessline.com/news/world/caatsa-will-india-receive-waiver-from-us-russia-sanctions/article24818487.ece
10
India Takes U.S. Steel Tariffs Complaint to the WTO // Reuters, May 23, 2018.
URL: https://www.reuters.com/article/us-usa-trade-india/india-takes-u-s-steel-tariffs-complaint-to-the-wto-idUSKCN1IO1WP
5Alexey Kupriyanov
Impact of the U.S. Anti-Russian Sanctions on the Russia– India Cooperation in the Military-Technical Area
sanctions (e.g., Krayinvestbank, Bank “Rossiysky countries in sectors that are now dominated by
capital” (PJSC), Khanty-Mansiyskiy Bank Otkri- the U.S. items.
tie). The first option is preferable, as it would
Finally, the third scenario involves a compro-
allow the countries to free themselves from their
mise between the United States and India. In
dependency on the U.S. dollar in bilateral trade.
exchange for satisfying a number of conditions
Although the bank that carries out financial
set by Washington – increasing orders from the
transactions for the purchase of Russian weapons
U.S. military-industrial complex, signing the
will nevertheless run the risk of falling under the
Communications Capability and Security Agree-
sanctions. This problem would be eliminated in
ment (COMCASA)11 and the Basic Exchange and
the second case; however, there is no guarantee
Cooperation Agreement (BECA) allowing India
that the receiver company will not be included in
and the United States to exchange geospatial
an updated sanctions list.
intelligence and receive access to encrypted
However, these are all temporary solutions. There communications systems, as well as a number
is no doubt that the United States is committed of concessions in other areas – India could be
to depriving Russia of its access to the Indian temporarily exempted from the purview of the
market and is prepared to toughen the sanctions CAATSA.
regime to achieve this if such actions are needed. The first scenario would have the worst impact
New Delhi must thus work out how friendly U.S. on the cooperation between Russia and India,
policy is towards India, and how willing Wash- while the second is the most positive. If the lat-
ington is to allow India an independent foreign ter scenario comes to pass, the two countries
policy. The United States threatens India through could achieve deeper integration of their mili-
financial sanctions to buy American weapons, tary-industrial complexes leading to increased
forcing India to either disarm theselves in front military technology sharing and a qualitatively
of China or get into debt. This means that New new level of cooperation. Meanwhile, the third
Delhi needs to make a choice that will directly scenario would likely see Russia lose a share of
affect the future of the country’s military-techni- the market but retain a foundation for continu-
cal cooperation with Russia. ing collaboration. The intermediate scenario
There are three possible scenarios here. The first appears to be the most likely. It would allow India
involves accepting all the conditions set by the to promote strategic cooperation with both Rus-
American side, and continue the line of further sia and the U.S. at the same time normalizing its
rapprochement with the United States, with the relations with China, balancing its policy in the
caveat that the country may become severely military cooperation and developing its own
dependent on the United States in the military military complex. This would allow India to mini-
and political sense. In this case, India will become mize the arms import in future.
a sub-hegemon of the United States in the region At present, both countries are interested in devel-
and will rely entirely on the U.S. assistance, thus oping military-technical cooperation. India, for
ending India’s military-technical cooperation example, needs modern fighter jets to replace
with Russia. the obsolete MiG-21 models that are still oper-
The second scenario involves the U.S. and Indian ated by the Indian Air Force. Russia could thus
leadership furthering their current policy. India take part in the MMCRA-2 tender with MiG-35
will continue along the path to becoming a great model and increase deliveries of fighter jets as
power, but this will require the expansion of con- part of inter-governmental agreements before
tacts with Russia as well as further normalization the tender winner is announced. Additionally,
of relations with China, which requires settlement Russian manufacturers of military transport air-
or, at least, freezing of border disputes, defining craft are willing to expand cooperation, as the
spheres of influence and respecting each other’s need for such equipment is increasing in the face
interests in the region, adopting measures aimed of the poor infrastructural development in the
at strengthening mutual trust. This scenario will regions under threat.
further imply non-expansion or even limitation The Indian land forces are in a dire need of light
of military cooperation with the U.S. that could tanks that can be used in mountainous terrain,
be replaced by closer ties with Russia and third primarily on the border with China. The Chi-
11
India Close to Signing COMCASA with US // The Hindu Business Line, March 27, 2018.
URL: https://www.thehindubusinessline.com/economy/india-close-to-signing-comcasa-with-us/article23366048.ece
6Russian International Affairs Council
Gateway House
nese People’s Liberation Army (PLA) has already However, the development of military-technical
tested and deployed light tanks that can oper- ties depends directly on which of the possible
ate in mountainous conditions, which gives it a scenarios of relations with the United States
clear advantage in an armed border conflict. Rus- the Indian authorities choose. Obviously, if New
sia could offer India 2S25 Sprut-SD self-propelled Delhi opts to follow the U.S. sanctions policy,
tank destroyers, which are classed as light tanks then expanded cooperation with Russia will be
and suitable for use in the mountains and capa- impossible. Indian authorities need to secure
ble of fighting enemy tanks, including with the the country’s release from the CAATSA, either
help of Refleks-M guided missiles. Finally, Russia through negotiations or by demonstrating the
also has something to offer the Indian Navy – intention to defend its national interests: India
from assistance in creating new aircraft carriers could force the U.S. to choose – either loose
to the supply of Project 1135.6 frigates and other a potential ally in the region or accept India’s
promising projects including Project 11661 guard unwillingness to sacrifice strategically important
ships. ties with Russia in favor of American arms export.
7Amit Bhandari, Chaitanya Giri, Kunal Kulkarni
U.S. Sanctions on Russia and their Impact on India – Russia Cooperation
U.S. Sanctions on Russia and their Impact
on India – Russia Cooperation
The U.S. and its European allies have steadily because the sanctions can block violators from
increased economic sanctions on Russia since doing business with U.S. banks, India must find
first imposing them in March 2014. The stated ways to circumvent the dominant dollar-based
purpose of sanctions is to punish Russia for its financial system – like specialist European banks
involvement in Ukraine, as well as its alleged with no exposure to the U.S. market, which are
cyber-meddling in the 2016 U.S. elections and willing to facilitate payments to Russia. Second,
its transfer of arms to Syria and alleged human- India can deepen its investments in Russian
rights abuses, also in Syria. energy and resource assets, to generate divi-
dend income in roubles. This will be used to
While the measures initially prohibited West-
pay Russia for defence hardware. Third, there
erners from doing business with Russians who
are ample precedents for introducing a dose of
were deemed to have undermined democratic
economic self-interest into American decision-
processes in Ukraine, the reasons given for the
making on the sanctions issue, taking advantage
sanctions have grown and the list of poten-
of the deal-making and transactional nature of
tially prohibited Russian partners has increased
the current administration in Washington. India
to include officials and businesses in Russia’s
must build its profile in the U.S. market, and
defence, energy and finance sectors generally.
Indian companies in the U.S. must actively create
Washington has applied the sanctions flexibly,
local jobs, building a goodwill that can influ-
imposing them strictly in sectors where U.S. firms
ence policy-makers to consider Indian concerns
are major competitors of Russia and ignoring
before imposing sanctions.
them in others where the U.S. relies on Russia. For
instance, the U.S. has exempted Russian agencies
that supply titanium for Boeing’s commercial I. Introduction
aircraft and rocket engines for the National Aero-
nautics and Space Administration (NASA), where Economic sanctions imposed by the U.S. and the
the U.S. has no indigenous capacity. European Union on Russia have escalated into a
virtual economic war, and India may get caught
This means individuals and businesses outside of in the crossfire. India’s access to essential mili-
the western alliance – including ones from India – tary hardware and technology and to a potential
now may face sanctions themselves if they don’t source of energy security stands threatened.
comply with the new rules.
As the world’s top importer of military hard-
As the economic battle wages, India is caught ware, India depends heavily on Russia for its
in the crossfire. Russia is its long-standing stra- purchases of equipment, maintenance of the
tegic partner and for the foreseeable future its existing equipment and joint ventures for man-
irreplaceable supplier of defence equipment and ufacturing and technology transfer. Between
weaponry. The sanctions pose significant risks 2007 and 2017, India’s defence imports from
to this vital relationship. Under the sanctions, Russia totalled about $24 billion out of a total of
Indian companies doing business with critical $34 billion. U.S. sanctions, which target most of
Russian defense suppliers like Rosoboronexport, Russia’s top arms manufacturers, threaten this
United Shipbuilding, and Almaz-Antey could find vital relationship.
themselves locked out of the dollar-based global
financial system controlled by the U.S. Even The sanctions also stand to jeopardize a bud-
the activities of Indian companies in areas not ding partnership between India and Russia in the
directly covered by sanctions could be affected. energy sector. Companies from both countries
have invested over $20 billion in each other’s oil
Given the risks, India must make some hard calls industry in the last ten years, steadily expanding
in deciding a present and future strategy. First, their cooperation in this sector.
ABOUT THE AUTHORS:
Amit Bhandari, Fellow of Energy and Environment Studies at Gateway House
Chaitanya Giri, Ph.D. in Chemistry, Fellow of Space and Ocean Studies at Gateway House
Kunal Kulkarni, Senior Researcher at Gateway House
8Russian International Affairs Council
Gateway House
The threat that the sanctions pose to India Finally, India must leverage its status as a large
comes from provisions contained in legislation market for energy and defence hardware to con-
passed by the U.S. Congress in August 2017.12 clude strategic deals to raise its profile within the
This law authorizes the President of the U.S. to U.S. so that Washington is less inclined to include
impose “secondary sanctions” on non-U.S. and it in its sanctions regime.
non-European entities that deal with Russian
defence and intelligence partners or engage in
certain transactions in Russia’s energy sector. II. Overview of Sanctions on Russia
The U.S. has been pushing India to increase its 1. Primary Sanctions: Restricting American
defence procurement from the U.S., and it could Dealings with Russia
use the sanctions to add pressure. In the energy
sector, America’s ally, the European Union, is a The U.S. first imposed sanctions on Russia
big importer of Russia’s oil and gas; perhaps, through a Presidential Executive Order in March
as a result, sanctions on Russia’s energy sector 2014 following the accession of Crimea. The
have been relatively mild and have not affected sanctions prohibit U.S. individuals and enti-
India. ties from dealing with any sanctioned Russian
entity. Initially imposed on individuals and enti-
So far, the U.S. has not imposed secondary ties deemed to have undermined democratic
sanctions against non-U.S. or non-European processes and threatened the security and sover-
individuals or companies for doing business eignty of Ukraine,14 the sanctions were extended
with a sanctioned Russian entity. The U.S. admin- to include private and state-owned businesses,
istration might overlook violations of the government officials and select sectors of the
sanctions by India to meet its critical defence Russian economy, including financial, defence
requirements. The proposed National Defence and energy.15
Authorization Act for Fiscal Year 2019 (NDAA-
19)13 allows the U.S. president to allow waivers In December 2016, new sanctions were imposed
to CAATSA in the ‘interests of U.S. National Secu- for alleged cyber-meddling in the 2016 U.S. elec-
rity’ – in a likely reference to India’s concerns. tions.16 The Executive Orders will continue to
However, India’s long-term defence policy can- apply unless terminated by the U.S. President.
not be predicated on waivers granted by a third Annex I contains a list of the orders and legisla-
party or assumptions about how the U.S. will tion passed for sanctions against Russia.
act in a certain situation. Moreover, by seeking a Persons and entities sanctioned are on a Spe-
waiver, India tacitly gives credibility to unilateral cially Designated Nationals and Blocked Persons
sanctions. List (SDN) maintained by the U.S. Department
This policy research paper analyzes the Western of Treasury’s Office of Foreign Assets Control
sanctions on Russia and their implications for (OFAC). Under OFAC directives the assets of those
India-Russia relations. It argues that India must on the SDN list are blocked, and no U.S. person is
devise mechanisms to ensure its ability to pur- allowed to conduct any transactions with those
chase Russian military hardware and services on that list. A separate Sectoral Sanctions Identifi-
despite U.S. sanctions. To avoid being sanctioned, cations (SSI) List, drawn up pursuant to Executive
it must be able to process payments to Russia Order 13662,17 prohibits named persons and enti-
via banks in the European Union. It also needs ties from carrying out certain transactions. (See
to earn income in roubles so that it can bypass Annex II).
third-party banks entirely and deal directly with The sanctions mentioned above prohibit U.S.
Russia. persons from dealing with sanctioned Russian
12
Countering America’s Adversaries Through Sanctions Act (CAATSA) // US Department of the Treasury, Government of the United States of America.
URL: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/hr3364_pl115-44.pdf
13
National Defense Authorization Act for Fiscal Year 2019 // Document Repository, U.S. House of Representatives, May 15, 2018.
URL: https://docs.house.gov/billsthisweek/20180521/CRPT-115HRPT-676.pdf
14
E.O. 13660 – Blocking Property of Certain Persons Contributing to the Situation in Ukraine // Office of the President of the United States.
URL: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_eo.pdf
15
E.O. 13661 – Blocking Property of Certain Persons Contributing to the Situation in Ukraine // Office of the President of the United States.
URL: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_eo2.pdf
16
E.O. 13757 – Taking Additional Steps to Address the National Emergency With Respect to Significant Malicious Cyber-Enabled Activities // Office of the
President of the United States. URL: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cyber2_eo.pdf
17
E.O. 13662 – Blocking Property of Additional Persons Contributing to the Situation in Ukraine // Office of the President of the United States.
URL: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_eo3.pdf
9Amit Bhandari, Chaitanya Giri, Kunal Kulkarni
U.S. Sanctions on Russia and their Impact on India – Russia Cooperation
entities mentioned on the SDN List and there- amounting to $227 million18 and $1.26 billion19
fore, do not affect Indian companies unless they respectively for transactions with persons in
are registered and have operations in the U.S. sanctioned countries such as Libya, Iran and
Myanmar. Chinese telecom equipment company
ZTE was fined $1.2 billion in 2017 for violating U.S.
2. Secondary Sanctions: Power to Target
sanctions on Iran and North Korea. When ZTE
Foreigners made false statements during the probationary
The Presidential Executive Orders that initially period, U.S. companies were barred from supply-
imposed sanctions (primary sanctions) against ing any equipment to it for seven years.20
Russia were codified by the Countering Ameri-
ca’s Adversaries Through Sanctions Act (CAATSA)
3. European Union’s Sanctions against Russia
enacted in August 2017. CAATSA, which prevents
the President from lifting the sanctions without The European Union on March 17, 2014, imposed
congressional review, specifically requires the travel bans and froze assets of persons deemed
U.S. President to impose sanctions on foreign responsible for actions that undermine or
persons who either purposefully violate the threaten the territorial integrity, sovereignty and
sanctions against Russia or deal with Russia’s independence of Ukraine.21 The EU sanctions pro-
intelligence, defence and energy sectors. These hibit its members from dealing with sanctioned
“secondary sanctions” could affect India. (See Russian individuals and entities. The sanctions
Table 1). were first enacted for six months and have been
extended regularly since, with the latest exten-
Section 231 of CAATSA potentially could affect
sion due to expire on September 15, 2018.22
any dealings India has with Russian defence sector
entities. A list of Russian defence sector compa- On July 29, 2014, the EU adopted a comprehen-
nies published by the U.S. Department of State sive package of economic sanctions23 to:
as required by Sec. 231(d) of CAATSA, includes a) prohibit exports of dual use goods and tech
companies like Rosoboronexport, Almaz-Antey, nology for military use into Russia;
Russian Helicopters and Military-Industrial Cor-
poration (MIC) NPO Mashinostroyenia. These are b) restrict export of technology related to deep
some of India’s major Russian defence partners. water oil exploration and production;
Restrictions imposed by Sec. 225 and 226 on c) prevent Arctic oil exploration and production,
investments in offshore and shale projects in Rus- or shale oil projects in Russia;
sia will curb opportunities for India to strengthen d) restrict dealings with transferable securities
its energy security. The threat of sanctions will and money-market instruments.
deter Indian private and state-owned energy
giants from venturing into any restricted activi- The economic sanctions have been extended
ties. regularly, and are set to expire on Janu-
ary 31, 2019. Unlike the U.S., the EU conditioned
Indian companies and global businesses will be its sanctions solely on a resolution to the Ukraine
wary of dealing with Russia given that the pen- conflict.24 It also did not impose secondary sanc-
alties for violation of U.S. sanctions could be tions. As the European sanctions are designed to
substantial. For instance, in 2012, HSBC Hold- expire automatically unless renewed, they would
ings and Standard Chartered Bank paid fines be easier to unwind than the U.S. sanctions.
18
Standard Chartered Bank Agrees to Forfeit $227 Million for Illegal Transactions with Iran, Sudan, Libya, and Burma // United States Department of Justice,
Press Release. URL: https://www.justice.gov/opa/pr/standard-chartered-bank-agrees-forfeit-227-million-illegal-transactions-iran-sudan-libya-and
19
HSBC Holdings Plc. and HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution
Agreement // United States Department of Justice, Press Release.
URL: https://www.justice.gov/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations
20
Secretary Ross Announces Activation of ZTE Denial Order in Response to Repeated False Statements to the U.S. Government // United States Department
of Commerce Bureau of Industry and Security, Press Release.
URL: https://www.commerce.gov/news/press-releases/2018/04/secretary-ross-announces-activation-zte-denial-order- response-repeated
21
Concerning Restrictive Measures in respect of Actions Undermining or Threatening the Territorial Integrity, Sovereignty and Independence of Ukraine //
Council of the European Union, Council Decisions. URL: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014D0145&from=EN
22
Council Decision (CFSP) 2018/392 of 12 March 2018 Amending Decision 2014/145/CFSP concerning Restrictive Measures in respect of Actions Undermin-
ing or Threatening the Territorial Integrity, Sovereignty and Independence of Ukraine (Brussels: Council of the European Union, 2018) // Council of the
European Union. URL: https://eur- lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32018D0392
23
Ibid.
24
EU Restrictive Measures in response to the Crisis in Ukraine // European Council, Council of the European Union.
URL: http://www.consilium.europa.eu/en/policies/sanctions/ukraine-crisis
10Russian International Affairs Council
Gateway House
Table 1: Secondary sanctions provision under CAATSA
Section Cause for imposition of sanction Impact on India
225 This section amends the Ukraine Freedom Support Act of 2014 Indian energy sector
which provides as under – companies may lose out on
Persons making significant investment in crude oil projects that investment opportunities if
are: they are not allowed to invest
in certain energy projects in
1) in the exclusive economic zone of the Russian Federation in
Russia
waters more than 500 feet deep;
2) in Russian Arctic offshore locations; or
3) in shale formations located in the Russian Federation
226 Foreign Financial Institutions that facilitate significant Indian banking and financial
investments in Russian crude oil projects prohibited by the institutions will be wary of
Ukraine Freedom Support Act will be sanctioned financing Indian companies
investing in Russian crude oil
projects cited in Sec. 225
228 The Support for the Sovereignty, Integrity, Democracy, and Powers under this are
Economic Stability of Ukraine Act of 2014 was amended to wide and could target any
sanction the following: company that deals with a
1) persons who violate any license, order, regulation, or sanctioned Russian person
prohibition issued under any Executive order, or the Ukraine or entity
Freedom Support Act;
2) persons who facilitate a significant transaction including
deceptive or structured transactions, for or on behalf of any
sanctioned person or their child, spouse, parent, or sibling;
3) persons responsible for commission of serious human rights
abuses in any territory forcibly occupied or otherwise controlled
by the Government of the Russian Federation
231 Persons engaging in a significant transaction with a person that is Defence procurement and
part of, or operates for or on behalf of, the defense or intelligence joint ventures of Indian
sectors of the Government of the Russian Federation, including companies with Russia
the Main Intelligence Agency of the General Staff of the Armed could come under scrutiny
Forces of the Russian Federation or the Federal Security Service and affect India’s national
of the Russian Federation interests
232 Any person who makes an investment or sells, leases, or provides At present, no Indian energy
to the Russian Federation, for the construction of Russian energy company is involved in any
export pipelines any goods, services, technology, information, or Russian pipeline projects
support which:
1) has a fair market value of $1,000,000 or more; or
2) during a 12-month period, have an aggregate fair market value
of $5,000,000 or more
233 Persons making an investment of $10,000,000 or more (aggregate
in any 12-month period), or facilitates such an investment, if the
investment directly and significantly contributes to the ability
of the Russian Federation to privatize state-owned assets in a
manner that unjustly benefits –
1) officials of the Government of the Russian Federation; or
2) close associates or family members of those officials
234 A person that has exported, transferred, or otherwise provided to
Syria significant financial, material, or technological support that
contributes materially to the ability of the Government of Syria to:
1) acquire or develop chemical, biological, or nuclear weapons or
related technologies;
2) acquire or develop ballistic or cruise missile capabilities;
11Amit Bhandari, Chaitanya Giri, Kunal Kulkarni
U.S. Sanctions on Russia and their Impact on India – Russia Cooperation
Section Cause for imposition of sanction Impact on India
3) acquire or develop destabilizing numbers and types
of advanced conventional weapons;
4) acquire significant defense articles, defense services,
or defense information;
5) acquire items designated by the President for purposes of the
United States Munitions List under section 38(a)(1) of the Arms
Export Control Act
III. Selective Enforcement of the ing sanctions against Russia. Further, the U.S. has
left out sectors and companies of Russia that are
U.S. Sanctions against Russia closely tied with its own interests.
The U.S. has imposed sanctions on major military,
1. U.S.’s Dependence on Russian Titanium
finance and banking institutions of the Russian
Federation. Many of Russian defence compa- Titanium, a strong and light-weight element, has
nies are important suppliers of equipment to become a vital material for manufacturing air-
India and partners in joint ventures with Indian craft. The Russian titanium producer Verkhnyaya
defence entities. (See Table 2). Salda Metallurgical Production Association
(VSMPO-AVISMA) is the major supplier of tita-
Energy-sector companies in Russia have not
nium products to the world’s largest aircraft
been fully sanctioned, but certain restrictions
manufacturer, the U.S.-based Boeing Company. In
have been imposed on entities25 including
2017, Ural Boeing Manufacturing, a joint venture
giants like Gazprom and Rosneft. The restrictions
between Boeing and VSMPO-AVISMA, estab-
include prohibition on any support for Arctic
lished a large production unit in the Titanium
offshore or shale projects by these entities. Fur-
Valley Special Economic Zone in the Sverdlovsk
ther, these entities cannot obtain debt from U.S.
region of Russia.27
financial institutions with maturity longer than
60 days. These restrictions have so far not Boeing is projected to purchase titanium worth
affected India or Indian energy companies, but if $18 billion from Russia for its next generation
the U.S. clamps down further on Russia’s energy 787, 737 MAX and 777X commercial aircraft.28
sector, India could take a blow. Anticipating close collaboration and economic
The partial sanctions on the energy sector commitments, the U.S. did not include VSMPO-
seem to favour U.S. allies such as Germany and AVISMA among companies it has sanctioned. But
Italy, which depend heavily on Russian energy if the U.S. further tightens its sanctions grip, Rus-
exports, even though the U.S. has been push- sia could leverage its control on titanium supplies
ing these countries to move away from Russia and look at other interested partners like China.
and source their energy from the U.S. instead. Commercial Aircraft Corporation of China
This U.S. interest is further evinced by American (COMAC) and the United Aircraft Corporation
opposition to the proposed NordStream 2 gas (UAC) of Russia are partnering to build the CR-929
pipeline between Russia and Germany.26 wide-body, long-haul aircraft. VSMPO-AVISMA
Sanctions on defence and energy-sector com- is already exporting titanium components for
panies do not adversely affect the U.S. Russian COMAC’s smaller regional jet CR-919.29 Consi
energy companies that have strong ties with the dering China’s influence over its Belt and Road
EU have not been fully blocked. This shows the Initiative partners in Asia and Africa, which pro
selective approach adopted by the U.S. in impos- mise to become regional aviation markets,
25
Restrictions are imposed only on entities mentioned in the Sectoral Sanctions List maintained by OFAC of the U.S. Department of Treasury.
26
Section 257 of CAATSA also makes a mention of this opposition.
27
Ural Boeing Manufacturing Has Become a Resident of Special Economic Zone “Titanium Valley” // Titanium Valley. URL: http://titanium- valley.com/eng/
media/novosti/ural_boeing_manufacturing_has_become_a_resident_of_special_economic_zone_titanium_valley_
28
15% or More of Titanium Being Used by Three Leading Aircraft Manufacturers Boeing, Embraer, and Airbus for Their Airplanes Comes from Russia //
VSMPO-AVISMA. URL: http://www.vsmpo.ru/en/news/182/Tri_vedushhih_proizvoditelja_passazhirskih_samoletovjrbas_na_15_i_bolee_procentov_sosto-
jat_iz_rossijskogo_titana
29
VSMPO-AVISMA Corporation and Shanghai Aircraft Manufacturing Co. Ltd.(SAMC) Have Signed the Long Term Contract for Purchase of the Forging Pro
ducts in titanium for COMAC C919 Aircraft // VSMPO-AVISMA. URL: http://www.vsmpo.ru/en/news/181/Korporacija_VSMPOAVISMA_i_kompanija_Shang-
hai_Aircraft_Manufacturing_Co_Ltd_SAMC_podpisali_dolgosrochnij_kontrakt_o_zakupke_titanovih_shtampovannih_izdelij_dlja_samoleta_COMAC_C9
12Russian International Affairs Council
Gateway House
Table 2: Some of the major Russian defence companies under the U.S. sanctions
Company Relation with India
Partner in manufacturing of Kamov Helicopters with India’s Hindustan
Rosoboronexport
Aeronautics Limited (HAL)
Partner of India’s Defence Research and Development Organization
MIC “NPO Mashinostroyenia”
(DRDO) in Brahmos Project
Uralvagonzavod Supplier of military hardware like T-90 and T-72 tanks to India
Cooperation in shipbuilding (civil and military) with Hindustan
United Shipbuilding Corporation
Shipyard Limited
Almaz-Antey Manufactures the S-300 and S-400 air defence systems
Kalashnikov Сoncern Largest manufacturer of small arms in Russia
Russian titanium would find profitable markets The continuing trade and co-operation between
outside of the West. the U.S. and Russia in these sectors, critical to
both their economies, demonstrate that Mos-
2. U.S. Dependence on Russian Rocket Engines cow–Washington tensions have not reached a
The United Launch Alliance (ULA) is a leading U.S. breaking point.
satellite and spacecraft launch service provider
for commercial, civilian and military agencies. IV. Impact of Sanctions on India
It was formed through a joint venture between India’s relationship with Russia is developing
Boeing Defense, Space and Security and Lock- mainly in the defence and energy sectors, and
heed Martin Space Systems. The mainstay of the Indian entities in these sectors are potentially in
ULA is the Atlas-V expendable launch system, the line of fire. The consequences Indian com-
which is capable of lifting satellites up to 20 tonnes panies face in dealing with Russia, whether
to low-Earth Orbit (about 200 km from the Earth’s through trade or investment, could be on three
surface) and nine-tonne ones to geostationary fronts.
transfer orbit (42,000-35,000 km from the Earth’s
surface). At present, the Atlas-V uses Russian-made 1. Companies that are not exposed to the Western
RD-180 rocket engines supplied by a limited-liabil- markets may not fear being directly sanctioned
ity company RD-AMROSS, a joint venture between for business dealings with Russian companies,
Russian manufacturer NPO Energomash and the but they will be affected by the restrictions on
U.S.-based Pratt & Whitney.30 the access to Western financial and banking sys-
tems. Further, companies with exposure to the
Recognizing its lack of indigenously-built rocket U.S. may not be willing to deal with them.
engines, the U.S. categorically exempts the
National Aeronautics and Space Administra- 2. Most Indian multi-national companies have a
tion (NASA) and other non-defense agencies significant exposure to American and European
and customers from Russia sanctions.31 Nei- markets. They will not risk irking the U.S. govern-
ther the Russian space agency, the Roscosmos ment. This is especially true if their turnover in
State Corporation nor RSC Energia, a prominent Russia is less than in the Western markets.
shareholder in NPO Energomash, have been 3. If sanctioned, an Indian company will be unable
sanctioned by the U.S. to receive loans exceeding $10 million or engage
Titanium and rocket-engines are only two in other banking or foreign-exchange transac-
examples where the U.S. has been lax on certain tions with American financial institutions.32 They
Russian entities on which it is dependent, and also will be prohibited from receiving invest-
hence vulnerable to possible counter-sanctions. ments from a U.S.-based person or entity.33
30
RD-180 Engine Specifications // Engine Space. URL: http://engine.space/eng/dejatelnost/engines/rd-180/
31
Sec. 237. Countering America’s Adversaries Through Sanctions Act (CAATSA) // US Department of the Treasury, Government of the United States
of America. URL: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/hr3364_pl115-44.pdf
32
Sec. 235. Countering America’s Adversaries Through Sanctions Act (CAATSA) // US Department of the Treasury, Government of the United States
of America. URL: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/hr3364_pl115-44.pdf
33
Ibid.
13Amit Bhandari, Chaitanya Giri, Kunal Kulkarni
U.S. Sanctions on Russia and their Impact on India – Russia Cooperation
1. Defence Sector circumstances surrounding the transaction and
weigh various factors on a case-by-case basis.”35
India’s engagement with Russia in the defence
and energy sectors includes bilateral trade This could lead to sanctions on Indian entities
and investment involving joint ventures and acquiring new equipment. The U.S. effectively
manufacturing. Each of these can be affected dif- could prevent any dollar-based payment for these
ferently. systems. Admiral Phil Davidson, Commander
of the U.S. Indo-Pacific Command, opined that
a. Procurement of Spare Parts,
imposing sanctions under CAATSA on partners
Sub-systems (Existing Deals)
like India, Vietnam and Indonesia for buying Rus-
India’s military imports from Russia for 2017 sian equipment could have an adverse effect on
totalled $1.9 billion. The majority of this went for their relationship with the U.S.36 The steps the
spare parts for existing military equipment and U.S. President and the Secretary of State will take
sub-systems for equipment being built in India. remain to be seen.
The Indian Air Force (IAF) will soon be upgrad- India’s purchase of the S-400 system in the future
ing its fleet of Sukhoi Su-30MKI air superiority can cause complications, in addition to violation
fighter jets, its front-line aircraft. The Su-30MKI is of the sanctions. First, the S-400 is an advanced
currently equipped with N011M passive electroni- system which can keep the U.S. air force out of
cally scanned array (PESA) radar developed by the large chunks of global airspace. Second, India uses
Tikhomirov Scientific Research Institute of Instru- hardware from multiple sources – Russia, France,
ment Design. The IAF intends to upgrade almost the U.S., UK and Israel. In the digital world where
40 of its Su-30MKI with a highly superior Zhuk systems interact with each other and need to be
active electronically scanned array (AESA) radar, integrated, rival vendors like Russia and the U.S. will
which is developed by Phazotron, a subsidiary of not be at ease, sharing top-of-the-line hardware
the Concern Radio Electronic Technologies. All with customers operating competing systems.
these Russian companies are sanctioned by the
c. Joint Ventures
U.S.
India is building a domestic defence industrial base
Under a very strict reading of CAATSA, all of this
to reduce its dependence on imports. Forming
trade could be subject to sanctions. However, the
joint ventures with foreign military suppliers for
U.S. Department of State, in a briefing on second-
access to technology and knowhow is an impor-
ary sanctions, said there will be a “significance
tant strategy for achieving this goal. Russia, which
threshold to the implementation of the law.”34
has developed and manufactures advanced land,
This suggests that such imports relating to exist-
water and air systems, is a natural partner. India’s
ing equipment and sub-systems may not incur
Defence Research and Development Organisa-
sanctions from the U.S.
tion and Russia’s MIC NPO Mashinostroyenia have
b. Procurement of New Equipment already deve loped a successful partnership to
(New Deals) manufacture the BrahMos missile.37 India’s Hin-
Purchases of major new systems, such as the dustan Aeronautics Limited (HAL) has formed a
S-400 ballistic missile defence system developed joint venture with Rosoboronexport and Russian
by Russia’s Almaz-Antey, which India proposes to Helicopters for manufacturing Ka-226T heli-
acquire, could cross the significance threshold copters in India.38 NPO Mashinostroyenia and
mentioned in CAATSA. The authority to deter- Rosoboronexport are both sanctioned by the
mine whether a transaction is significant lies with U.S. Department of Treasury.
the U.S. Department of State which has stated So far, there are no reports that the India–Russia
that it “will consider the totality of the facts and joint ventures will be targeted by the U.S. under
34
Briefing on Sanctions with respect to Russia’s Defense and Intelligence Sectors under Section 231 of the Countering America’s Adversaries Through Sanc-
tions Act of 2017 // US Department of State, Government of the United States of America. URL: https://www.state.gov/r/pa/prs/ps/2017/10/275164.htm
35
Public Guidance/FAQs on Sanctions with respect to Russia’s Defense and Intelligence Sectors under Section 231 of the Countering America’s Adversaries
Through Sanctions Act of 2017 // US Department of State, Government of the United States of America.
URL: https://www.state.gov/t/isn/caatsa/275118.htm
36
Advance Policy Questions for Admiral Philip Davidson, USN Expected Nominee for Commander, U.S. Pacific Command (Declassified) // US Senate Commit-
tee on Armed Services, Government of the United States of America.
URL: https://www.armed-services.senate.gov/imo/media/doc/Davidson_APQs_04-17-18.pdf
37
Joint Venture Partners // Brahmos Aerospace. URL: http://www.brahmos.com/content.php?id=1&sid=20
38
India-Russia Joint Venture for KA 226 T Helicopters Incorporated // Embassy of India, Moscow, Press Release.
URL: http://www.indianembassy.ru/index.php/media-news/press-releases/1886-india-russia-ka-226-t-joint-venture-incorporated
14Russian International Affairs Council
Gateway House
the secondary sanctions provisions. However, United States and Other Foreign States. 39 Rus-
if the sanctions are strictly implemented, the sia has not enlisted the names of the companies
U.S. may sanction these Indian entities. Again, that will be sanctioned but these counter-sanc-
payments for these systems may be difficult if tions could hit the U.S. in sectors that have not
dollar-based transactions are prohibited. been sanctioned by the U.S. so far, including
important metals exports (e.g. titanium) and
Finally, a long-term issue that India must evalu-
technology such as rocket engines. India could
ate for its defence preparedness is the evolution
be affected in turn, as several Indian compa-
of old and new alliances: deteriorating U.S.–Rus-
nies have partnered with U.S. companies in
sia and U.S.–China relations, a simultaneous
these sectors. For example, Mahindra Defence
improvement in Russia–China ties.
Systems and Hindustan Aeronautics Limited
have recently entered into a joint venture with
2. Energy Sector Boeing to build the F/A 18 Super Hornet fighter
India is the world’s third largest consumer of aircraft in India.40
energy and a major importer of oil and natural Since India has been vocal in not accepting unila
gas, and its demand is growing. Russia is the teral sanctions by the U.S. and EU against Russia,
world’s second largest exporter of oil and the top it needs to examine whether counter-sanctions
exporter of gas. implemented by Russia will affect Indian firms.
India’s energy imports from Russia are minimal
because of logistical issues: Russia has large
energy consumers (Western Europe, China,
V. Navigating the Sanctions
Japan and South Korea) right at its borders, while 1. Alternate Financial Intermediaries
India finds it much cheaper to import oil from
If India, as expected, decides to ignore the U.S.
West Asia, which is far more accessible.
sanctions and proceed with military purchase or
Indian companies have invested more than $10 collaboration with Russia, the primary problem
billion in acquiring stakes in Russian oil fields. will be payment to Russian entities outside the
(See Table 3). Russia’s oil major, Rosneft, acquired dollar-based system. Sanctions make payment in
India-based Essar Oil (now Nayara Energy) with dollars impossible. This is similar to the problem
its 20-million-ton petroleum refinery, in 2016 for India faced in its energy trade with Iran in the last
$13 billion. decade.
Russia’s Rosneft is the parent company of two India might seek to revive the rupee-rouble
Russian energy companies that have received trade, which it had with the former Soviet Union.
Indian investment: Vankorneft and Taas-Yuriakh. But in the absence of significant export products
Rosneft and Vankorneft are both on the SSI list from India to Russia, this is not an option in the
and are subject to restrictions, including prohibi- short term. Moreover, there were issues relating
tion on U.S. persons from extending new debt to calculation of repayment of the amounts due
for a maturity period longer than 60 days and to the Soviet Union. Unless an equitable calcu-
any support in exploration or production for lation mechanism is set in advance, this option
deepwater, Arctic offshore, or shale projects. does not seem viable.
India can choose to make further investments in Payment in euros might be possible. Most
Russia’s oil and gas industry to reduce its vulner- leading European banks would not facilitate
ability to high oil prices subject to the restrictions these transactions for fear of falling foul of U.S.
under Directives 2 and 4. (See Annex II). financial regulators. But a number of smaller
European banks without a presence in the U.S.
could be used to make payments for Russian
3. Counter Sanctions by Russia
spare parts and other support until India can
On June 4, 2018, Russian President Vladimir put longer term measures in place. Some of
Putin signed the Federal Law No. 127-FZ on these banks do not deal in dollars and in some
Counter-Measures for Hostile Actions of the cases have been set up to facilitate dealings
39
Federal Law No. 127 – Measures of Counteracting Unfriendly Actions of the United States of America and Other Foreign States // Consultant Plus.
URL: http://www.consultant.ru/document/cons_doc_LAW_299382/ (In Russian).
40
Boeing Partners with HAL and Mahindra for F/A-18 Super Hornet ‘Make in India’ // The Boeing Company. URL: http://www.boeing.co.in/news-and-media-
room/news-releases/2018/april/boeing-partners-with-hal-and- mahindra-for-fa-18-super-hornet-make-in-india.page
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