War, payment issues impact military supplies to India from Russia & Ukraine. IAF worst hit

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Russia has stalled delivery of S-400 Triumf air defence systems to IAF. Efforts are underway to reduce dependence on the two countries, it is learnt.

New Delhi:
The Russia-Ukraine war has impacted military supplies to India from both countries, with the Indian Air Force (IAF) being the worst hit, ThePrint has learnt.

However, sources in the defence and security establishment said there has been no impact on the operational preparedness of the forces, and efforts are underway to reduce dependence on these two countries.

Such has been the impact of the war that the Russians have given it in writing that they won’t be able to supply the remaining two regiments of the S-400 air defence systems to the IAF within the stipulated time.

Sources explained that the delay in supplies is due to a combination of the ongoing war, which has impacted their production capacity, and their need to focus internally rather than on exports, besides the payment roadblocks.

Incidentally, India and Russia are in an advanced stage of talks to start using the Russian financial messaging system — the Service Bureau of the Financial Messaging System of the Bank of Russia (SPFS).

As reported earlier, SPFS became a necessity as the US, along with the European Union, cut off seven Russian banks from SWIFT — the Belgium-based cross-border payment system operator — including the one that was being used for payments earlier by India.

Another key element that is being worked upon is an agreement on mutually recognising Indian RuPay cards and Unified Payments Interface (UPI) in Russia, and the Russian MIR cards and its Fast Payments System (FPS) in India.

Sources said that things will ease up once the new payment mode is finalised.

IAF worst hit
Sources admitted that the biggest impact of has been on the IAF, which depends on a lot of Russian and Ukrainian supplies for spare parts to keep its fleet — which includes frontline fighter aircraft such as the Su-30 MKI, besides certain missiles — flying.

They said that the impact would start showing a few months from now if the Russia-Ukraine war continues.

In its submission to the Parliamentary Standing Committee on Defence in March, the IAF had blamed the Russia-Ukraine war for its sharp decline in budgetary projection.

“…our projection last year was Rs 85,000 crore and we finally got an allocation of Rs 57,000 crore which we consumed. This year, the projection itself has been less because of this Russia-Ukraine war as some of our deliveries are not taking place. So, we have already been told that those deliveries will not take place,” the report by the Committee had noted.


It added a submission from an IAF officer that read: “As far as reduced projection is concerned, some part of it covers spares…but there is a major project…where the deliveries have been stopped because of the war going on…That is why the major part of projection has been reduced.”

Sources said this was the S-400 air defence system, but noted that the issue related more to Russian production capabilities than payments.

They added that while defence equipment has been hit, oil and other trade continues to take place for which payments are made.

Payments a challenge
Sources said a large number of payments are pending from the Indian side because of the series of sanctions against Russia.

As reported by ThePrint last year in August, while New Delhi and Moscow had worked out a simpler system for payments, secondary sanctions imposed on Russia have led to fresh challenges.

Sources said that payments nearing USD 2 billion are pending and Russia has refused to extend the credit for non-critical items.

“Both countries are in talks to find a payment system that can be used. The heavy trade imbalance between the two countries is also a roadblock to finding easy solutions,” a source explained.

However, sources maintained that the forces have not been hit operationally: “There is stuff in the stockpile which can cater to any immediate need. Also, efforts are on to source some of the spares from a third country and if need be, they will cannibalise from others.”

The Navy and Army have also been hit but the impact on them is lesser, it is learnt.

“The Russians are focussed on their own internal supplies while ensuring that their export commitments are also adhered to, at least the most needed ones to friendly countries,” a source said.

Explaining the other reasons for the halt in supplies, sources said Russia is trying to up its production capacity to cater to its own needs but availability of workers is a huge issue. Another issue is with transportation as shipping companies, fearing American sanctions, are wary of doing business with Russia.

Moreover, insurance for these Russian goods has increased several times, sources said.
 

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