Sanctions on Moscow impacting payments to Russian companies, says report by Stockholm International Peace Research Institute

Arms sales of top 100 companies grow 1.9% in 2021; Ukraine war creating supply chain challenges this year, says report

Published - December 07, 2022 12:54 am IST - New Delhi

Russian S-400 anti-aircraft missile launching system. Representational file image.

Russian S-400 anti-aircraft missile launching system. Representational file image. | Photo Credit: AFP

In what could possibly have an impact on Russian arms supplies to India as the war in Ukraine drags on, Western sanctions on Moscow are impacting payments to Russian defence companies as well as reducing their access to semiconductors, according to the latest report by the Stockholm International Peace Research Institute.

Arms sales of the top 100 arms-producing and military services companies across the world grew by 1.9% reaching $592 billion in 2021, and the Ukraine war in 2022 is creating supply chain challenges, says the report. The total sales of two Indian companies in the list — Hindustan Aeronautics Limited (HAL), ranked 42, and Bharat Electronics Limited (BEL), ranked 63 — increased by 6.7% and 20%, respectively.

“Russia’s invasion of Ukraine in 2022 will probably reverse the trend of increased civilian production among companies in the military-industrial complex because of the need to support the war effort. However, the sanctions imposed on Russia will also have an impact on its arms companies. Almaz-Antey, for example, stated in March 2022 that it could not receive payments for some of its arms export deliveries. Russian companies are also facing reduced access to semiconductors,” the SIPRI top 100 arms-producing and military services companies 2021 factsheet said.

The war in Ukraine has added to supply chain challenges for arms producers, as Russia is an exporter of raw materials used in the manufacturing of military equipment, such as aluminium, copper, steel and titanium, the report stated. “With the implementation of sanctions, including the European Union’s (EU) ban on imports of Russian steel products, and the broader severing of Western countries’ economic ties with Russia, arms companies have begun to reorganise their supply chains to procure raw materials from other producers,” it noted.

As reported by The Hindu earlier, “milestone” payments which are to be made as per delivery timelines have been delayed following Russia’s ouster from the SWIFT system and in some cases while deliveries have been made by Russia, the payments are yet to be cleared. India and Russia are trying to find a workaround for the payments and it has been learnt that rupee-rouble payments are not solving the issue as rupees are accumulating on the Russian side due to trade imbalance.

On HAL and BEL, the report said both companies have benefited from major orders placed by the Indian armed forces in recent years. Indian Ordnance Factories, which appeared in the 2020 edition of the Top 100, was restructured into seven smaller companies in October 2021 and thus dropped out of the ranking, it stated.

For the first time, a Taiwanese company has been included in the Top 100. NCSIST, ranked 60, specialises in missiles and military electronics and recorded arms sales of $2 billion in 2021.

The U.S. continues to dominate the top 100 list, with 40 companies accounting for $299 bn in arms sales in 2021.

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