India is unable to use US dollars due to concerns about secondary sanctions, while Russia remains unwilling to accept rupees due to exchange-rate volatility. Read more at straitstimes.com.
NEW DELHI – Russian deliveries of military supplies to India have ground to a halt as the countries struggle to find a payment mechanism that doesn’t violate US sanctions, according to Indian officials with knowledge of the matter.
One possible solution would be to use euros and dirhams, the currencies used to pay for Indian imports of discounted Russian crude, a senior Indian government official said. However, using these currencies to pay for weapons could invite more scrutiny from the US over sanctions than oil, as well as pushing up costs due to unfavourable exchange rates for India.
The issue of payments for weapons has taken on more urgency of late, and dominated discussions when National Security Adviser Ajit Doval visited Moscow in January, the people said. It also featured heavily in talks in Delhi this week between Russian Deputy Prime Minister Denis Manturov and India’s External Affairs Minister Subrahmanyam Jaishankar, who said this week that the rupee settlement needed more work.
In addition to the impact of sanctions on potential buyers, Russian weapons sales are likely to keep declining as the Kremlin prioritises supplies to its own army to support its invasion of Ukraine, the Stockholm International Peace Research Institute said in a report in March.The Indian Air Force, which depends on a Russian fleet of fighters and helicopters, is among the worst hit from the disruption in supplies from Moscow, the people said.
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