As India and the U.S. prepare for the historic 2+2 meeting of defence and foreign ministers, India will try to convey its concerns on the CAATSA (Countering American Adversaries Through Sanctions) Act and its implications for India’s defence preparedness.
While India claims not to comply with other than UN sanctions, CAATSA makes it almost impossible for India to pay for purchases of Russian military hardware – which is where the true bite of the U.S. law lies, says Mumbai based think tank Gateway House in its latest research paper “US Sanctions on Russia and its Impact on India”. Virtually all the top Russian defence manufacturers have been brought under CAATSA, and anyone dealing with them or facilitating these deals can be a potential target of U.S. sanctions.
The paper, co-authored by three Gateway House researchers with expertise in energy, space and law, examines the CAATSA sanctions imposed by the U.S. and its potential impact on India’s defence procurement. This ranges from difficulties in sourcing spare parts for existing systems to the impossibility of paying for new military hardware such as the S-400 air defence system.
“CAATSA sanctions by the U.S. are opportunistic. They target Russia’s defence and finance sectors, but entirely omit sectors such as space where the U.S. depends on Russia, and where sanctions could hurt America’s interests” says Dr. Chaitanya Giri, one of the authors of the research paper.
Among the suggestions made by the paper to counter the U.S. sanctions on Russia, one is the development of alternate payment systems to the dollar-denominated global financial system. Amit Bhandari, fellow for Energy and Environment Studies, Gateway House, recommends both short and long term solutions for India. “A short term fix is (for India) to use specialist small banks in Europe which don’t have any business in U.S. dollars. However, any long term solution requires India to create an income stream in Rubles to bypass the U.S. banking system entirely. India must invest in Russian resource companies such as Rosneft and Tatneft which pay out large dividends. As resource exporters, they are naturally hedged against currency fluctuations as well,” Bhandari says.
To read the entire research paper, click here.
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Gateway House: Indian Council on Global Relations
Gateway House: Indian Council on Global Relations is a foreign policy think tank in Mumbai, India, established to engage India’s leading corporations and individuals in debate and scholarship on India’s foreign policy and the nation’s role in global affairs. Gateway House is independent, non-partisan and membership-based. Our key areas of study are geopolitics, geoeconomics, energy & environment, space and ocean studies national security and Bombay history.