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Are Sanctions Against Russian Military Industrial Complex Withering?


Sanctions on the Russian MIC appears to be working in inverse proportion to the extension of war in Ukraine.


In the aftermath of launch of war in Ukraine which Russia dubbed as a Special Military Operation, a series of sanctions were imposed by the United States in particular followed by allies and partners in the West on Russian companies, banks et al.


The entire military industrial complex [MIC] of Russia was sanctioned.


A list of entities that have been sanctioned by the United States impacting Russian Defence enterprises summarized is available here.


The United States Department of State designated 22 entities. In addition Department of Commerce issued list of 91 companies which also included some of the companies listed by the State Department and some companies based in countries such as Estonia and Singapore for sanctions.


Technology Related Sanctions were also imposed to deny Russia import of technological goods critical to a diversified economy. This included Russia-wide denial of exports of sensitive technology, primarily targeting the Russian defense, aviation, and maritime sectors to cut off Russia’s access to cutting-edge technology.


The United States also targeted ten Russia’s largest financial institutions, including the imposition of full blocking and correspondent and payable-through account sanctions, and debt and equity restrictions, on institutions holding nearly 80% of Russian banking sector assets.


Immediate Impact in India


An immediate impact of launch of war in Ukraine on February 24, 2022 and US sanctions on the Russian MIC was felt in India which was organizing a Def Expo at Gandhinagar in Gujarat from March 10 to 14 the same year.


Russia and Ukraine — which were on the brink of war — were to participate in Defence Expo to be held at Gandhinagar in Gujarat from March 10 to 14, prior to outbreak of hostilities.


However to avoid a prickly situation, Indian authorities postponed the DefExpo 2022 due to 'logistics problems experienced by participants' while some analysts believed that this was due to the concerns over Russia and Western companies participating at the same venue just as there was widespread outrage against Moscow in the United States.


Importantly a “bilateral military industry conference with Russia was planned during the event,” as per the Economic Times.


Making virtue of a necessity Indian Ministry of Defence held the DefExpo in the month of October from 18th to 22nd in at the same venue Gandhinagar the capital of the State of Gujarat primarily for Indian companies as well foreign companies registered in India.

Leaving out foreign companies altogether avoided a possible contestation on Russian participation with the West.


Aero India 2023


Come Aero India 2023 in Bengaluru from February 13 to 17th. Foreign companies participated in full strength with domination of the United States and the European defence majors with large companies as Boeing, Lockheed Martin, Dassault Aviation, Saab and so on occupying much of the space including chalets.


The Ministry of Defence mentioned major exhibitors as Airbus, Boeing, Dassault Aviation, Lockheed Martin, Israel Aerospace Industry, BrahMos Aerospace, Army Aviation, HC Robotics, SAAB, Safran, Rolls Royce, Larsen & Toubro, Bharat Forge Limited, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL) and BEML Limited.


The Russian presence was limited to Rosoboronexport the export arm of the Russian Government.


While in the normal course Rosoboronexport occupies the centre stage in one of the halls, this time around the presence was restricted to a rather quiet flank in Hall B. While there were some Russian companies likely to be present it was difficult to easily locate them.

Never the less the shift from October 2022 to February 2023 in just a few months can be noticeable.


Presence of Rosoboronexport in the same venue and Hall as other western defence majors was noticeable.


IDEX 2023


At IDEX 2023 held in the UAE from 20 - 24 February 2023, Russian companies participated in a separate pavilion which was despite as per Reuters pressure on the Gulf States not to allow Moscow.


Organisers said 65 countries were taking part in IDEX, including major U.S. defence conglomerates such as Raytheon Technologies (RTX.N), Lockheed Martin (LMT.N) and Boeing (BA.N).


Literature for IDEX 2023 doesn’t show Russia or Russian firms as exhibitors, but the release said a “joint Russian exposition at IDEX 2023 will be located in a separate pavilion where Rosoboronexport and defense-industrial complex enterprises will present the latest high-tech military products for all branches of the armed forces as per Breaking Defense.

The separate Russian joint display at IDEX 2023 showcased the latest high-tech military products for all services of the armed forces.


More than 200 full-scale models of armament, ammunition and military gear will be on display for the guests and visitors of the pavilion as per some media reports.


Are sanctions weakening?


Clearly from the high point of sanctions with postponement of DefExpo 2022 in March by India to Russian companies huddled up in a separate pavilion in IDEX 2023, there appears to be a subtle shift in governments implementing US sanctions against Russia.


Clearly as secondary sanctions are not being enforced there is adequate scope for allowing Russian companies to participate in expositions.


The test will be when new contracts are signed or when Washington feels the necessity to impose secondary sanctions on countries for importing Russian arms.


Such a decision will be difficult to make or impose given the acceptance that countries as India cannot just shift their dependence on Russian arms in a hurry. India is also an important strategic partner in the United States overall contestation with China.


On the other hand imposing such decisions on wealthy Gulf Arabs will not be practical with the likely impact on arms sales to these countries.


The Arabs in turn may be use Russian presence to bargain hard for procurements from the U.S and Europe.


Poor performance of Russian military equipment in the Ukraine war may be a dampener for Rosoboronexport.


Thus, while it is not business as usual the arms bazaar may become a buyers market with bargain pricing from Russia as well as the West.


Apparently sanctions may work in inverse proportion to the length of the War in Ukraine, given lack of secondary restrictions on countries, the large Russia MIC and bargain hunting for weapons at a time when militarization is gaining traction ironically as nations seek to arm themselves.

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