Russia-Made Warships Set To Join India’s Navy, Despite Sanctions

An Indian Naval ship. Photographer: Niharika Kulkarni/Getty Images

(Bloomberg) -- India will take delivery of two Russian-made warships in the next few months, as the two countries work around US sanctions that created difficulties in paying for Russian weapons systems, according to senior Indian officials.

One ship is likely to be handed to the Indians in September, with another being delivered early next year. The delivery of the ships are two years behind schedule due to the war in Ukraine, the officials said, asking not to be named because of the sensitivity around the issue.

The two frigates are part of a four-ship deal that the Indians signed with the Russians back in 2018. The other two ships are being built in India, in collaboration with Russia, but are also behind schedule due to war-related supply chain issues, the officials said.

The guided-missile frigates with stealth features were to use gas turbines made in Ukraine. Ukraine-Russia trade ground to a halt in 2014 in the aftermath of Russia's annexation of Crimea and India procured the turbines using a third country, senior officials said.

US sanctions on Russia for its war in Ukraine had stalled weapons delivery to India for over an year, as the countries struggled to find a payment mechanism that didn't violate US sanctions.

India and Russia, also strategic partners, have been able to work around the payments issue, the people said, without disclosing details.

India's Ministry of External Affairs, the Indian Navy and Ministry of Defense declined to comment.

New Delhi is paying Moscow in Indian rupees for weapons but uses a mix of currencies, such as UAE dirhams and US dollars, to pay for crude oil. India is the largest purchaser of Russia's seaborne oil. The mechanism had briefly run into trouble as payments amounting to billions of dollars accumulated in India. New Delhi had declined to pay in Chinese yuan given its tense relations with Beijing, the people said.

The US has largely refrained from penalizing India for its dealings with Russia, including holding back on penalties for an advanced air defense system, as it courts India amid intensifying competition with China.

Despite buying more weapons from the US and France and Prime Minister Narendra Modi's aggressive program to build military hardware in the country, Russia remains India's biggest supplier of military hardware, accounting for 36% of India's arms imports, according to the Stockholm International Peace Research Institute.

SIPRI, an independent think tank that studies the global weapons trade, notes in a recent report that it is the first time in six decades that Russia made up less than half of India's weapons imports.

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