Deliveries of five regiments of S-400 air defence systems under a $5.43 billion deal with Russia are expected to be completed by year end or early 2024, according to official sources. However, issues of delayed payments as well as insurance and reinsurance remain major stumbling blocks delaying deals in the pipeline, an issue that would be in focus during Russian Foreign Minister Sergey Lavrov’s talks with his Indian counterpart S. Jaishankar on the sidelines of the G-20 Foreign Ministers meeting taking place just after the first anniversary of the ongoing war in Ukraine.
Delivery of the third S-400 regiment has been completed, as acknowledged by Russia’s Ambassador to India Denis Alipov earlier this month, which leaves the deliveries of two more regiments. The second and third regiments saw delays of a few months. There have been delays in “milestone payments”.
The three regiments are deployed along the Northen, Eastern and western borders, sources said.
In July 2019, the Union government said in a written reply in Parliament that S-400 deliveries were “likely to be made by April 2023”. In August 2022, speaking at the Army Expo in Moscow, the CEO of Russia’s Rosoboronexport Alexander Mikheyev had said that they would deliver all five S-400 regiments to India by late 2023.
Meanwhile, the Indian Navy’s Kilo class submarine, INS Sindhuratna, which just secured an extension of life in Russia, could not be brought back due to transportation issues. The initial plan was to move it by a transport dock ship directly from Russia, which didn’t materialise, following which the Navy tried to transport the submarine by sea to Norway and then via a transport dock to India, which also didn’t materialise, sources said. It will now sail on its own, making port calls along the way, it has been learnt.
Officials had acknowledged that transportation and finding cargo carriers outside the purview of sanctions and their insurance has been a major issue. Insurance and reinsurance is under discussion, also to avoid cargo ships under sanctions, as reported by The Hindu earlier. On this, diplomatic sources stated that most of the shipments being used were increasingly Russian.
India has contracted five S-400 regiments under a $5.43 billion or ₹40,291 crore deal as per a conversation rate of ₹74.2 against the dollar at the time, signed in October 2018. The deal has been delayed from the start over payment issues. With the looming threat of U.S. sanctions under CAATSA (Countering America’s Adversaries Through Sanctions Act), the two sides had worked out payments through the rupee-rouble exchange. The delivery schedule was slightly delayed following delays in making the 15% advance of the $5.43 billion when the deal was signed, as it was to be executed in the rupee-rouble method.
The payments troubles compounded after Russia was shut out of the global SWIFT system for money transfers. India and Russia have agreed to conduct payments through the rupee-rouble arrangement after trying payments in euros as well. With several big ticket deals under implementation, there are a large volume of payments to be made and discussions are continuing on both sides to resolve it.
Speaking at a seminar earlier this month, Mr. Alipov said that the vostro accounts had been opened and the mechanism of the rupee-rouble trade has been established, and it’s now a matter for banks to use it, while terming many Indian banks as “overcautious” for fear of any secondary sanctions from the U.S.