As Russia courts India, help from a surprising corner: US sanctions

Why We Wrote This

From challenges come opportunity? That may well be President Vladimir Putin’s mantra in New Delhi as he seeks to reinsert Russia into India’s diversified portfolio of relationships. Amid today’s galloping global disorder, questions about one of Asia’s most important emerging powers, India, and where it fits into today’s rapidly shifting geopolitical equations, seem to be getting short shrift.

But not from Russian President Vladimir Putin. He is currently in New Delhi, holding his second summit meeting with Indian Prime Minister Narendra Modi so far this year.

The agenda is packed with huge arms deals and other traditional items. But for Mr. Putin, the underlying challenge is how to win back the allegiance of one of Moscow’s staunchest Soviet-era friends. And this at a time when growing Russian-Chinese strategic unity is making India increasingly nervous, and as ongoing US efforts to win over Indians leave Russia consistently lagging the US in Indian public opinion polls.

But as Putin makes the rounds in New Delhi, with a large Russian business delegation in tow, one of the things working in his favor is the Trump administration’s new determination to crack down hard on anyone breaking US sanctions on Russia and Iran, two of India’s major trading partners.

Just last month Washington slapped tough “secondary sanctions” on China for purchasing Russian S-400 air defense systems and fighter planes. Not coincidentally, the main deal Putin and Mr. Modi plan to sign at this summit is a $5 billion sale of Russian S-400 missiles to bolster Indian air defenses.

“We are in a new situation,” says Nandan Unnikrishnan, a Russia expert at the independent Observer Research Foundation in New Delhi. “Since 2014, when Russia’s crisis with the West grew acute over Crimea and other issues, the Russians have been moving closer to China. India has been working to diversify its global relationships. The US has been trying to woo India to become more of a counterbalance to China in Asia, and they have been winning the public relations war over Russia.”

‘Weaponizing the dollar’

But Mr. Trump’s aggressive unilateralism has introduced a new note of uncertainty, he says.

“At first we didn’t worry about Trump, because we assumed there was a consensus in Washington that better relations with India were a good thing,” he says. “But India is really concerned that the US will sanction us, as they did China, under the new CAATSA measures , for buying the S-400 from proscribed Russian defense firms.

“Under Trump, the US seems to be weaponizing the dollar, forcing everyone to choose, which is something new,” he adds. “Nobody likes to be threatened, so this is having an adverse impact on Indian public opinion.”

During the cold war India had close military, economic, and political ties with the USSR. It was never a Soviet “ally” in any formal sense and, since India’s foreign policy doctrine remains strictly wedded to the principles of non-alignment, it is not likely to join any alliance in the future. But for many decades its main source of military equipment was the Soviet Union, and to this day about 70 percent of Indian equipment is of Russian origin.

Russia is also the only key supplier of civilian nuclear technology to India, with two new nuclear reactors under construction in India’s south, and is also India’s main partner in developing its ambitions to become a space-faring power.

Tightening US-India relationship

But the formerly tight Indo-Russian relationship has been fraying for years, as India seeks new partners for military equipment, economic investment, political cooperation, and cultural engagement. Indians have become players in the US – from Wall Street, to Silicon Valley, to Hollywood – pursuing opportunities that Russia cannot match.

In recent years India has established a strategic dialogue with the US, and placed large orders for American military equipment, especially drones, and is even considering purchasing the F-35 stealth fighter. It has also moved away from Russian suppliers by opting for French and Israeli equipment.

“Everyone understands there is no possibility of restoring old relationships,” says Fyodor Lukyanov, editor of Russia in Global Affairs, a leading Moscow-based foreign policy journal. “Now everybody is trying to balance, diversify, keep options open. And for Russia the key problem is to balance relations with India and China. The fact is, we need to maintain strong and positive ties with both, even if the strains between them are growing.”

At least in the military sphere, Russia still has things to offer that the US cannot match. The S-400 air defense system, for example, which has no exact counterpart in the US arms inventory. Another is a willingness to feed India’s hunger for technology transfer, by agreeing to build Russian warships and helicopters in India. Russia has also leased a nuclear-powered Akula class attack submarine to India’s navy, and appears on the verge of agreeing to provide a second one.

“Russia is seen as a reliable standby partner for India, one that has a solid track record with us,” says Vinay Shukla, Russia editor for India Strategic, a New Delhi-based monthly defense journal. “When India came out as a nuclear weapons power in 1998, practically the whole world put sanctions on us. But Russia didn’t. That is remembered.”

Indian analysts say that the looming threat of US sanctions for purchasing new Russian military equipment is viewed as a problem that cannot be solved by caving in to US demands, but rather by finding ways to avoid using the US dollar as a means of payment. That could mean India will join a growing list of countries, including the European Union, who are creating alternative financial vehicles to avoid the growing thicket of US sanctions and continue trading with countries like Iran and Russia.

“We are going to have to find some innovative ways of paying each other. Actually, the Russians seem to have quite a few ideas about this,” says Mr. Unnikrishnan. “Perhaps we could even go back to the old India-Soviet system of barter, at least for the short term. Hopefully all these problems will eventually blow over.”

Private sector uncertainty

But no one is quite sure that, if push comes to shove, India’s vibrant private sector – for whom the US is a major market – will go along with overt sanctions-busting, even if it seems the patriotic thing to do.

“US unilateral sanctions work not politically, but economically,” says Asoke Mukerji, former Indian ambassador to the United Nations. “Many Indian companies that are active in the US market will argue in favor of abiding by the US sanctions. These are big companies, and they have a lot of political influence. But India has made it clear that we will abide only by UN sanctions.”

For Putin, these challenges represent a major opportunity to create a new paradigm for Russian relations with India, one that is resistant to the new pressures being exerted by Washington.

But not on the old model, and only up to a point, say experts.

“There is a public perception that the US and India are becoming aligned, and that everything is falling into place,” says Mr. Mukerji. “But on the ground, things look different.”

India is diversifying its relationships, he emphasizes, not making any fundamental realignment.

“It’s not one pie anymore, there are multiple pies. But India is not going to be pushed into one corner of a multi-polar world.”