Russia's secret plan to bypass sanctions with Indian electronics

Russia secretly acquired sensitive goods in India and analyzed the possibility of building facilities in that country to secure the components necessary for military operations, revealed the British daily "Financial Times" on Wednesday, which reviewed Russian state correspondence on the matter.

As the newspaper describes, the Russian Ministry of Industry and Trade, responsible for the arms sector, prepared confidential plans in October 2022 to spend around 82 billion rupees (then 1 billion USD) to obtain key electronics through covert channels, avoiding scrutiny from Western governments.

The plan, presented in letters to a dubious trade promotion body with strong ties to Russian security services, aimed to use significant reserves of rupees accumulated by Russian banks due to substantial oil sales to India. Russia saw India as an alternative source of essential goods "previously supplied by unfriendly countries."

The documents indicate that Russia and its Indian partners targeted dual-use technologies—goods that can be used for both civilian and military purposes and are subject to export controls by Western countries. Moscow even planned to invest in Russian-Indian electronics development and production facilities.

The "FT" notes that it is unclear to what extent Moscow has implemented the plan. However, detailed information about trade flows suggests that in certain categories of goods identified in Russian correspondence, trade with India has increased.

The newspaper notes that although Indian Prime Minister Narendra Modi expressed regret over the impact of the invasion of Ukraine on developing economies and called for peace, Delhi, in practice, provided Russia an economic lifeline when Western sanctions hit it.

India became the main buyer of Russian oil, and the total trade between the two countries reached a record level of 66 billion USD in the financial year 2023-24, a fivefold increase compared to the year before the invasion of Ukraine. Part of the trade was conducted in rupees, leading to a surplus of this currency remaining in Russia.

The Kremlin acknowledged that it has had difficulties repatriating profits from oil sales due to sanctions and currency restrictions. According to sources involved in the trade and Western officials, Russian groups used rupees for gold trading and buying goods to circumvent sanctions.

As "FT" describes, the "secret" correspondence mentions Alexander Gaponov, Deputy Head of the Radioelectronics Department in the Russian Ministry of Industry. The newspaper notes that this area is susceptible as Russia depends on electronics produced abroad for use in missiles, drones, and electronic warfare.

In October 2022, Gaponov approached a less transparent Moscow organization linked with Russian security services—the Consortium for Foreign Economic Activity and International Intergovernmental Cooperation in Industry—to present plans to acquire critical components from India.

Vadim Poida, president of the consortium, responded that the organization had developed specific plans with the Russian electronic industry and representatives of relevant Indian state-owned and private enterprises, which have "great potential" to utilize rupees accumulated by the Kremlin.

Poida outlined a five-step plan to help Russia spend the rupees and organize a steady supply of dual-use components. Russia was to create a "closed payment system between Russian and Indian companies" outside the oversight of Western countries, "including through the use of digital financial assets."

The Poida consortium estimated that Russia could purchase components worth up to 100 billion rubles, including parts for telecommunications, servers, and other complex electronic equipment previously bought in Western countries. According to Poida, consortium members have started pilot projects for producing Russian-designed components in India and have conducted detailed work on hiding information about the involvement of Russian individuals and corporate entities and the logistics of supplies through third countries.