New Payment Mechanism to Bypass US Sanctions to Begin with S-400 System sale to India

India and Russia have worked out a new financial mechanism to bypass US sanctions against Moscow which will commence with payments for the sale of S-400 anti-missile system.

New Delhi is expected to make the first instalment payment for the S-400 by the end of the year, believed to be 10% of the $5.6Billion price tag, following which Moscow will commence deliveries by 2020.

"We have agreed with India on a mutually acceptable settlement mechanism, which is valid over the entire duration of the signed contract documents, beginning with the payments for S-400 systems. The mechanism is fully coordinated, permanent and mutually acceptable for both parties," Vladimir Drozhzhov, Deputy Director of the Federal Service for Military-Technical Cooperation (FSMTC) said in Moscow today.

Under current US sanctions, Russian defence entities are prohibited from receive payments in United States dollars using the US-controlled SWIFT inter-bank settlement mechanism. Also, Washington has threatened to impose secondary sanctions against countries that purchase Russian defence equipment.

D. Bala Venkatesh Varma, Indian Ambassador to Russia in December 2018 had said that the two countries were working to enhance the scope of Rupee-Ruble trade in the procurement of defence equipment.

"It is not just the S-400s, there are also other contracts which are subject to discussions on finding new modes of payment. It has not been finalized yet, but the general direction is greater use of national currencies. So there will be payments made in rupees and rubles, and we intend to take this forward on a mutually acceptable basis," Varma had said.