US Sanction on Russia and its Impact on India

Context

India has decided to go ahead with S-400 deal with Russia despite of US sanctions.

US sanction on Russia

Sanctions are very powerful tool government use to compel other nations to stick to certain norms. They are powerful alternative to war.

In 2014

• Russia annex the Ukrainian peninsula of Crimea and supported a separatist uprising in eastern Ukraine. This led to imposition of sanction by US and EU on Russia.
• US suspended all talks with Russia at various platform. G8 was reverted to G7 countries by excluding Russia
• Later the US and the EU imposed visa bans and asset freezes on certain Russian and Ukrainian individuals and organisations.

In 2017

• In August 2017, United States passed the Countering America’s Adversaries Through Sanctions Act (CAATSA) against Russia for reportedly influencing and manipulating the 2016 presidential election process.
• The sanction which are implemented through executive order create both primary sanctions risk and secondary sanction risk
• It aims to counter the aggression through punitive measures.

Primary sanction: under this U.S. persons are generally prohibited from transacting with blocked persons or organisation.

Secondary sanction: Non-U.S. persons could face the imposition of secondary sanctions under Section of CAATSA. This prohibit the foreign government and companies to do business with Russia.

For example, if the volume of transactions between a foreign institution and Russia are significant enough. Then secondary sanctions can prohibit U.S. persons or institution from doing business with that foreign institutions.

Impact of US sanction on India

Defence deal

• More than 70 % of India’s defence imports come from Russia. There are concerns that this would be affected by the sanctions.
• It would also affect all the joint ventures (JVs) both existing and planned between Indian and Russian defence companies.
• India would not be able to acquire the spare parts, components, raw materials or assistance for the maintenance of already procured Russian equipment.
• Also, according the Indian defence procurement rules, foreign vendors of defence equipment need to furnish guaranteed from designated Indian banks before bidding for any project. This would not be possible in the light of sanctions.
• Going ahead with the S-400 deal would impact India-US ties

Recent Development over S-400 deal

• India affirms to go ahead with S-400 deal
• Also, there is lot of internal debate going on within US to provide waiver to friendly country like India and Turkey.
• US is considering to waive sanctions for 180 days for allies who have purchased Russian weapon.
• The issue will be discussed during the 2+2 talks between the Indian and U.S. defence and foreign ministers which is rescheduled in September in New Delhi.

Energy

• India had acquired Imperial Energy and had a 20% stake in Sakhalin-I oil and gas project. Gazprom of Russia and GAIL of India have jointly collaborated in oil exploration in Bay of Bengal. There are concerns that this would be impacted by sanctions
• It would also impact India’s investment in Vietnam and Central Asian countries
• This would impact India’s increased import of oil from US in recent time.

Bilateral relations

• Russia is moving closer to China to compensate for the troubled relations with the US due to sanctions. This is a concern for India.
• Russia is all weather friend of India. The US sanction pose a challenge for policy maker to maintain good relation with both US and Russia.

Way ahead

• Both US and Russia need to left its cold war mentality and work together for peaceful global order
• Russia-U.S. cooperation is vital to find lasting solutions in West Asia and to counter threat of terrorism
• US sanctions on Russia has failed to create desired impact on Russia both Economically and Diplomatically.Trump – Putin summit in Helsinki raise new hope of normalisation of relation between US and Russia
• India should discuss its concern with US in upcoming 2+2 meet in New Delhi.