Russia taps Indian resources for covert military tech acquisitions

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 approximately 1.4 billion CAD) to obtain key electronics through covert channels to avoid scrutiny from Western governments.

The plan presented in letters to a "shady" trade promotion body with strong ties to Russian security services was to use "significant reserves" of rupees accumulated by Russian banks due to the dynamic 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.

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

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, threw Russia an economic lifeline when Western sanctions hit it.

India became the primary buyer of Russian oil, and the total trade between the two countries reached a record level of approximately 90 billion CAD 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 having difficulty 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 particularly sensitive 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 digital financial assets.

The Poida consortium estimated that Russia could purchase components worth up to 1.7 billion CAD, 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.