Avoid export of missile-related items to Russia: US cautions India Inc

Flags risk of suppliers facing Western sanctions

The US government has cautioned Indian manufacturers to ensure that items, including defence equipment, are not exported to Russia. Such exports could support Russia’s missile systems and increase the risk of these companies facing Western sanctions. 

A senior government official said, “US officials are leading consultation and sensitisation meetings with the industry to raise awareness about avoiding the export of specific products such as chemicals, aeronautical parts, and components that could be used in missile systems.”

The official clarified that while the items exported to Russia are of dual use, they are not included on the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) list. This list covers the export of certain dual-use items, munitions, and nuclear-related materials, including software and technology. Exports of these items  are either prohibited or regulated under a licence. 

This development follows recent US sanctions imposed on some Indian firms for circumventing efforts to isolate Russia amid ongoing geopolitical tensions. The situation began over two years ago when the conflict between Russia and Ukraine led Western nations to impose sanctions on Moscow in early 2022. India, however, maintained a neutral stance, balancing its interests and relationships with both the West and Russia.

Bilateral trade between India and Russia has grown rapidly, particularly in the past two and a half years, largely due to increased oil imports from Russia following its standoff with Ukraine in February 2022. Despite this, India’s export growth to Russia has been modest, leading to a widening trade deficit.

According to data from the commerce department, exports to Russia grew 35 per cent year-on-year (Y-o-Y) to $4.26 billion during 2023-24. Engineering goods exports to Russia saw an 85 per cent Y-o-Y increase to $1.35 billion, although overall exports of such goods grew only 2 per cent.

A Reuters report last month cited a US Treasury official warning Indian banks that financial institutions engaging with Russia’s military-industrial base risk losing access to the US financial system. The warning was communicated to Indian banks and industry associations.

“Any foreign financial institution that does business with Russia’s military-industrial base risks being sanctioned itself and could lose access to the US financial system, and likely other financial systems,” the official said.

Dual-use goods a concern

 

> US held consultations and sensitisation meetings with the industry to increase awareness about avoiding specific product exports

> Items of concern include chemicals, aeronautical parts, and components used in missile systems

> These items are dual-use but not included on the SCOMET list, which covers certain controlled items and technologies