The war in Ukraine has compounded challenges in executing the deal.
An estimated USD 3 billion payments are currently held up due to payment challenges. Efforts to resolve this crisis through a Rupee-Rouble Arrangement have not been successful due to trade imbalances and accumulating Rupees on the Russian side.
INS Vikramaditya, the sole aircraft carrier operated by India, is of Russian origin.
India operates nine of the fourteen conventional submarines sourced from Russia.
Between 2018 and 2021, defence trade between India and Russia amounted to approximately USD 15 billion, encompassing significant deals including S-400, frigates, AK-203 assault rifles, and emergency procurements.
The defence trade relationship has been influenced by geopolitical dynamics, including the Balakot air strike in 2019 and the standoff with China in Eastern Ladakh in 2020.
What is Russia’s S-400 Deal?
Russia's S-400 deal refers to the procurement of the S-400 Triumf, a highly advanced mobile Surface-to-Air Missile (SAM) system.
The system can engage all types of aerial targets including aircraft, unmanned aerial vehicles (UAV) and ballistic and cruise missiles within the range of 400km, at an altitude of up to 30 km.
The system can track 100 airborne targets and engage six of them simultaneously.
Apprehensions among companies and traders about sanctions are hindering trade expansion. The Reserve Bank of India's intervention is necessary to address these apprehensions and promote bilateral trade.
Officials acknowledge the need for a comprehensive approach to resolve the payment crisis, as no single measure may be sufficient.
Currency diversification, including the use of Yuan, is considered to mitigate payment challenges and expand trade options.
Resolving payment issues and streamlining mechanisms for executing major defence deals are critical for ensuring the timely delivery of advanced defence systems, bolstering national security, and enhancing the capabilities of the Indian armed forces.