US sanctions: Minor impact seen on India-Russia ties

The latest trade sanctions by the US on Russia may not have direct implications on India-Russia ties, but it could make minor dent on defence and energy ties.

Procurement of defence equipment from Moscow might become a tad difficult. This is because state-run Indian banks having exposure with the US financial system may shy away from financing the pending weapons deal that are in the pipeline, sources told BusinessLine .

According to the sources, India is also under pressure from the US to increase defence purchases from it and as a result some of defence deals that New Delhi had planned with Moscow might suffer a “setback”, while the government will be seeking to obtain funds from a consortium of banks to finance some of the defence deals, sources said.

At present, defence deals worth around $15 billion are in pipeline between India and Russia that includes purchase of air defence systems, stealth frigates, light utility helicopters and fighter jets.

As far as the energy ties are concerned, India is a consortium partner in the Russian Sakhalin oilfields in which US’ oil and gas giant ExxonMobil is also a player.

Interestingly, the present US Secretary of State Rex Tillerson is a former CEO of ExxonMobil.

Last month, the US Treasury Department had imposed a penalty of $2 million on ExxonMobil for violating sanctions that were imposed by the Obama administration in 2014.

According to experts, the impact will not be felt in the short term, but in the long run Indian businesses will feel the pain.

“There will not be any immediate impact on the overall relationship but there may be some impact on the modalities and impact the two processes are employing currently,” said Nandan Unnikrishnan, Vice- President of a New Delhi-based foreign policy think-tank Observer Research Foundation (ORF).

RS Butola, former Chairman of Indian Oil Corporation Ltd, said, “whatever I understand of the sanctions that India may not be majorly impacted.” The sanctions imposed by the US this time are for the new businesses and projects and not the existing ones. Besides, India only recognises UN sanctions. Also, experts point out that only making payments may pose a challenge. But, they are also quick to point out that Russian systems are pretty strong and oil scenario has changed now.

However, some experts also said, since bilateral trade between India and Russia is a minuscule $7.48 billion, the impact will not be significant. “These sanctions will have no relevance on India-Russia ties. It will be business as usual,” said India’s former Ambassador to Russia (2004 to 2007) Kanwal Sibal, who is also a former Foreign Secretary.

Showing similar confidence was Narendra Taneja, Energy Expert. “Both the US and Russia are important to India, which has good strategic ties with them.”

Also, Indian refiners are now getting crude oil from the US as well, while Russia has been a partner for sometime now.

On Wednesday US President Donald Trump signed – Countering America's Adversaries Through Sanctions Act – measures that will impose sanctions on Russia, Iran and North Korea. The sanctions on Russia were imposed for its alleged role in the US elections held last year and also for its role in the Ukraine crisis.

Calling the action as a “full-scale war” Russia Prime Minister Dmitry Medvedev said Moscow will make it further difficult for US firms to invest in Russia and that the move “ends hopes for improving our relations with the new US administration.”

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