Indian Government Puts Final Stamp on Purchase of $2 Billion Russian Frigates

13:59 GMT, 4 October 2018

The approval by the Cabinet Committee on Security (CCS) is considered the final nod for any defense procurement ahead of the signing of the final commercial contract. The CCS approval that comes just a day before the annual bilateral summit indicates that the final contract is in the offing.

Sputnik

New Delhi (Sputnik) — A day before the India-Russia annual bilateral summit, India's Cabinet Committee on Security (CCS) has approved the procurement of four frigates from Russia at a cost around $2 billion.

"The deal involving four frigates for the Navy has received the green signal from the cabinet committee on Wednesday. Two would be built in a Russian Shipyard. Other two would be built in India," a highly placed government official told Sputnik.

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India has already contracted with Ukraine for acquiring M7N.1E gas turbine engines for powering the two frigates which are almost fully built at Russia's Yantar Shipyard at Kaliningrad. The two frigates were originally designed to be fitted with Ukraine built gas turbine engines but after the Crimean fallout, Russia stopped importing the engines from Ukraine, rendering the fleet of little use for the Russian Navy. After acquiring the engines from Ukraine, India will supply them to Yantar shipyard to be integrated into the frigate. The frigate will be also integrated with BrahMos missiles.

Russia and India in 2016 agreed to utilize the frigates for the Indian Navy which was already operating its predecessor, the Talwar class frigates. The two other frigates will be built at the Goa Shipyard Limited (GSL) facility for which Ukraine will supply the engine as well.

The procurement of five S-400 air defense systems for the Indian Air Force (IAF) was approved by the CCS last week. The Indian Air Force is expected to receive first S-400 squadron within 24 months after the contract's signing. The rest will be delivered within the next 4-5 years.

Meanwhile, the US has reiterated its threat of sanctions urging India to forgo transactions with Russia. "We urge all of our allies and partners to forgo transactions with Russia that would trigger sanctions under CAATSA," a US State Department Spokesperson said on Wednesday when asked about India's plan to purchase the S-400 missile defense systems from Russia.

However, India says it is devising effective strategies to circumvent US sanctions.

"India needs a mix of short-term and long-term fixes to overcome the sanctions issue. In the short-term, India can use small, specialist European banks with no exposure to the U.S. financial system to make such payments — as it did to counter U.S. sanctions on Iran," Amit Bhandari, Fellow for Energy and Environment Studies, Mumbai-based think tank Gateway House writes in a recently-released research paper, "U.S. Sanctions on Russia and its Impact on India."

The longer-term solution is to have an income stream in Russian Roubles by investing in profitable, dividend-paying Russian natural resource companies such as Rosneft. This cash stream will also provide India a cushion against rising petroleum prices, Bhandari concludes.