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India, Russia's Second Largest Importer of Restricted Technology

As the largest conflict in Europe since the Second World War, the Russian invasion of Ukraine is one of the world’s most pressing concerns in the 21st Century. The invasion, which Russia initiated on 24th February 2022, has involved hundreds of thousands of casualties and has created the largest refugee crisis in Europe of this century. Two years after its initiation, several efforts are being made to ensure that the conflict peacefully subsides without any more escalations. While the Russo-Ukrainian Conflict persists, with an increasing number of countries experiencing an obligation to support either contender in this battle, India has risen to become Russia’s second largest supplier of restricted technology, second only to China.





The Issue:

Russia’s imports from India involve restricted technology such as microchips, circuits and machine tools, which exceeded purchases of over $60 million in April and May and $90 million in June, according to an article by Bloomberg Publications. India also exports dual-use technology to Russia, which faces several sanctions against procuring it. Nearly one in every five exports of sensitive technology to Russia is Indian-manufactured. A notable reason for this shift is Russia's vast reserve of Indian rupees, which has accumulated from oil sales, providing the capital for trade. The most significant issue the exchange poses is that it defies the attempts to restrict Russia’s access to these resources by nations that aim to undermine Russia in its conflict with Ukraine. Tensions arose when India’s foreign relations ministry declined to comment about the exports when questioned about it by concerned foreign diplomats.


How do the Imports Play in Russia’s Favor?

According to the Russian state correspondence from The Financial Times, Russia has secretly been exploring the acquisition of sensitive goods and building facilities in India. Confidential plans drawn up by Moscow’s industry and trade ministry revealed plans for $1 billion to acquire critical electronic goods without the knowledge of Western governments. US sanctions and currency restrictions made oil profits difficult as stated by the Kremlin. Russian groups utilised rupees in monthly exports to trade gold and purchase goods, according to Western officials. This enabled them to import several prohibited goods without facing international sanctions. The exports have raised concerns amongst Western nations who have been attempting to restrict Russia’s access to vital technology with sanctions and hence cripple Russia’s battle capabilities. Russia gains substantially from these transactions as it supports them with key resources for manufacturing their weapons and fortifying their military.


How does India Profit from Russia’s Oil Trade?

Nearly $10.5 billion is the latest estimate for the amount India has saved in foreign exchange by purchasing discounted Russian crude oil between April 2022 and May 2024. The sanctions imposed by Western nations on Russia have forced it to offer drastically reduced prices for its crude oil, a benefit India makes use of. For instance, the average landed price of Russian crude in FY24 was approximately $76.39 per barrel, compared to $85.32 from other suppliers. The discounts Russia provides benefit Indian refineries further since they prompted other suppliers to compete with price reductions, a crucial benefit for a nation that imports nearly 85% of its crude oil needs.


What Might the Imports Indicate for India?

This rise in India’s role as a supplier has strengthened India’s position as a major buyer of Russian oil tremendously amidst Western efforts to curb such trade and diplomatic relations with Russia. While the country profits from this trade, its actions undermine the efforts of nations such as the United States (US) and the European Union (EU) to disarm Russia’s military capabilities by restricting the technology required to manufacture Russian weapons. India’s efforts also challenge the US and EU policymakers as they still wish to cultivate diplomatic relations with Indian Prime Minister Modi’s government despite it continuing to pursue relations with Putin’s administration. In July, a letter was written by the US Deputy Treasury Secretary to the Confederation of Indian Industries (CII) warning of sanctions that would be imposed on Indian banks and businesses conducting business with Russia. This depicts the difficulties that await India for its exports to Russia and India must be prepared to face them, should it continue to support Russia.


Conclusion:

The Russian invasion of Ukraine remains one of the most pressing concerns of the times. Alongside redefining geopolitical alliances, the conflict has allowed countries like India to emerge as key economic players whose role in current worldly affairs cannot be undermined. The Indian Prime Minister acknowledges the conflict and its impact on the concerned nations and their people. His administration continues to support Russia with exports of crucial technology in the face of international sanctions. These exports overturn Western efforts to weaken Russia and may destabilise the nation’s security as India currently faces sanctions from its allies in the times to come.


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