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01:28 PM, October 2, 2018
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Biggest-ever Indo-Russian Arms Deals Expected Amidst US Sanctions Shadow
Indian PM Modi and Russian President Modi: File photo courtesy of Sputnik

When Russian President Putin visits India on October 5, he is expected to oversee the signing of defence deals worth an estimated US$10 billion, the single-biggest bunch of defence contracts to be concluded at one time between the two countries.

The deals include the US$5.6 billion S-400 missile defence systems purchase, a deal to manufacture 200 Kamov 226T helicopters worth an estimated $1 billion, 4 naval frigates estimated at $2 billion, a deal to manufacture 650,000 Kalashnikov AK-103 rifles in India and the purchase of 2 Il-78 transport planes which will form the platform for Israeli-made airborne early warning radar system. In addition, a $600 million upgrade proposal for the Indian Air Force’s fleet of IL-76 transporter and IL-78 aerial refueling aircraft is also on the cards.

While the S-400 deal is a certainty with the cabinet committee on security having cleared it and the naval frigates deal is a follow-on contract, the other deals could see commitments to get closer to potential contracts. For example, the Kalashniov AK-103 rifle could see the signing of an inter-governmental agreement (IGA) to make the rifles in India together with an Indian partner, most probably the Ordnance Factory Board.

The Kamov 226T ‘Make in India’ program for 200 helicopters is progressing with India’s HAL and Russian Helicopters having formed a joint venture for the purpose. The expected agreement will spell out the number of aircraft to be brought to India in a fly-away condition and the aircraft to be manufactured in India.

The Indo-Russian defence agreements come at a time when the United States has imposed sanctions against the Russian arms exporting agency, Rosoboronexport and Rostec, the holding company of various Russian arms manufacturers. In addition, the US has threatened to sanction India if it buys major Russian arms systems.

The sanctions already enforced against Russian entities will mean that Indian entities cannot use the US banking system to remit payments for Russian arms. Both countries are expected to find a way out of the situation by using currency of their own countries to make the payment to bypass the US banking system.

However, Washington is unlikely to impose secondary sanctions against Indian entities for buying Russian military equipment as such a move might impact New Delhi’s ability to pay for defence purchases from the US as well.

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