The US may not for the moment impose sanctions on India under the controversial Countering America’s Adversaries Through Sanctions Act (CAATSA) for inking the S-400 deal, but the manufacturer of the missile system, Almaz Antey, has been in Washington’s crosshairs for long.
After India announced the deal, the US said CAATSA was not intended to damage partners, but it was non-committal on a waiver. Almaz Antey – Russia’s prime manufacturer of air defence systems – has been a top target for the US administration, and figures on an older sanctions list that restrict financial institutions from dealing with it.
The Indian position has been that the S-400 talks with Russia were initiated much before the CAATSA sanctions were announced and that the deal has been done in national interest.
However, o n September 21, the US had sanctioned Chinese military equipment development department under CAATSA for S-400 purchase by Beijing. This contract, too, was signed before the sanctions act was passed, but the penalty has apparently been levied because the actual delivery and payments have taken place this year.
For India, dealing with Almaz Antey poses a big challenge primarily on the payments front. No Indian bank is willing to be used as the payment channel for the transaction, even if assurances that CAATSA won’t be used are given. CAATSA authorises the US to suspend export licenses on dual use items, a ban on investments by US entities, prohibition of loans from international institutions and visa restrictions.
Also, Almaz Antey figures on the late 2016 `Specially Designated Nationals’ (SDN) sanctions, which forbid financial transactions with it. To move $5.43 billion to Russia, the banking channel will not be in a position to transfer without the risk of getting on the banned list. “As international transactions involved trade in dollars, no bank can aff o r d t o b e non-compliant to the sanctions list,” an official had told ET.
The problem also lies with the Russian side as its main banks too have refused to be used for making these transactions.
All these banks risk getting isolated from the world trade for processing any payments for the S-400 deal. A solution has been in the works for the past several months that involve using India’s Syndicate Bank NSE -3.42 %, but the issue has not been fully resolved.
People familiar with the development told ET that the Russian side has suggested a permanent solution to the issue by setting up an alternate bank just for military transactions. The matter has been discussed at senior levels but little headway seems to have been made, the sources said.
Even before CAATSA, payments worth several billions of dollars to Russia for ongoing contracts have been stuck over the past two years due to the SDN sanctions. They include payments for life extension programmes for Russian Kilo class submarines, money to be sent to Moscow to repair the Chakra nuclear attack submarine that met with an accident, and ongoing spares and parts contracts.
Key civilian sector deals
Protocol for consultations between the Ministry of Foreign Affairs and MEA for the period 2019-2023—this will intensify Foreign Office consultations between the two sides. India has decided to open consulates in Ekaterinburg and Astrakhan.
Memorandum of Understanding between the Russian Ministry of Economic Development and NITI Aayog— the fi rst meeting of the Strategic Economic Dialogue between NITI Aayog and Russian Ministry would be held later in 2018 in Russia to push investments in priority areas in respective countries. Russia will open an office of the Far East Agency in Mumbai to promote investments in Russia’s Far East
Memorandum of Understanding between ISRO and the federal space agency of Russia ‘ROSCOSMOS’ to train Indian astronauts for India’s manned mission Gaganayan
Memorandum of cooperation between the Indian and Russian railways. India invited Russia to participate in rail infrastructure in India. The Russian side expressed its interest in participating in the international competitive biddings as and when the Ministry of Railways of India decides to execute the railway speed raising projects
Action plan for Prioritization and Implementation of Cooperation Areas in the Nuclear Field — for second Russian supported nuclear power plant; third country partnership
MoU between Russian Ministry of Transport and Indian Railways in the Development Cooperation in Transport Education — to help Delhi buildtransport and connectivity corridors
MoU between the National Small Industries Corporation (NSIC) and the Russian Small and Medium Business Corporation (RSMB)
Cooperation Agreement in the fertilisers sector between the Russian Direct Investment Fund” (Russian Sovereign Wealth fund); PJSC Phosagro (PhosAgro) and Indian Potash Limited.