Why in news?

The U.S. recently sanctioned around 400 entities and individuals, including 19 Indian firms and two Indian nationals, over links to Russia’s war efforts in Ukraine.

Sanctions typically restrict trade, investment, and financial transactions with targeted entities, aiming to curb their economic and operational activities by cutting off access to U.S.-based resources and systems.

For firms, this can mean being barred from the U.S. market, losing American partners, and facing significant financial and operational limitations, potentially affecting global trade and their business operations.

What’s in today’s article?

• Economic sanctions
• Indian Firms and Nationals sanctioned
• Possible Impact on India

Economic sanctions

• Understanding Sanctions
  • Sanctions aim to restrict or end economic ties between the sanctioning entity and the target, taking forms such as import/export bans, trade restrictions, asset freezes, and exclusion from banking systems.
  • Sanctions may be:
    • Comprehensive: Affecting entire countries, such as the U.S. embargo on Cuba.
    • Targeted: Directed at specific entities, groups, or individuals, as with U.S. sanctions on Russian firms.
• Global Mechanisms for Sanctions
• Sanctions are imposed by individual countries, such as the U.S. on nations like Iran, North Korea, and Russia, which has become the world’s most sanctioned country post-Ukraine war.
• International bodies like the UN (through its Security Council) and the EU also have mechanisms to impose sanctions.
• Efficacy and Criticisms of Sanctions
  • While intended to apply economic pressure, the effectiveness of sanctions is debated.
  • Targets can find ways to bypass restrictions, and enforcing sanctions can impact both the sanctioning country and its industries reliant on sanctioned imports.
  • For instance, despite extensive Western sanctions, Russia’s economy remains resilient with ongoing trade with countries like India and China.
  • UN lacks direct enforcement powers, relying on member nations for implementation.

Indian Firms and Nationals sanctioned

• The United States has imposed sanctions on 19 Indian firms and two Indian nationals for providing critical components to Russian companies linked to the defense sector.
• These sanctions restrict trade and financial dealings with these firms and individuals.
• Companies sanctioned – few examples
  • Ascend Aviation India Private Limited:
    • Shipped over 700 items valued above $200,000, including U.S.-origin aircraft parts from the Common High Priority List (CHPL), to Russian companies from March 2023 to March 2024.
      • Working with the European Union, Japan, and the United Kingdom, Bureau of Industry and Security (BIS) has developed the CHPL.
      • CHPL includes 50 items that Russia seeks to procure for its weapons programs.
  • Mask Trans
  • Supplied more than $300,000 worth of CHPL-listed aviation components to Russia’s S7 ENGINEERING LLC between June 2023 and April 2024.
  • TSMD Global Private Limited
    • Exported CHPL items worth at least $430,000, such as integrated circuits and CPUs, to Russian firms from July 2023 to March 2024.
  • Futrevo
    • Provided over $1.4 million worth of CHPL-listed electronic components to SMT-ILOGIC, a manufacturer of Orlan drones, between January 2023 and February 2024.
• Individuals sanctioned
  • The directors of Ascend Aviation India, Vivek Kumar Mishra and Sudhir Kumar, were also sanctioned

Possible Impact on India

• Impact on Indian Defence Sector
  • The U.S. sanctions, aimed at restricting supply of dual-use items to Russia, are expected to have minimal impact on India’s defense ecosystem.
  • Most sanctioned companies have no significant ties to major defense projects, with only RRG Engineering involved in limited work with the DRDO and the Indian armed forces.
• Trading Activities and Foreign Connections
  • Many of the sanctioned entities appear to be engaged in trading, importing Western electronics for resale to sanctioned Russian companies. For example:
    • Denvas Services: Supplies digital kiosks and has Russian nationals among its directors and shareholders. It has been accused of procuring U.S.-origin microelectronics for Russia's conventional weapons.
    • RRG Engineering: The only company with limited defense ties, accused of sending microelectronics to Russia-based Arteks Limited Company. It has previously supported DRDO projects with manpower and provided non-critical supplies like NBC warfare detectors and satcom stations.
• Availability of Equipment in India
  • Industry experts believe the sanctioned equipment, such as microelectronics and NBC detectors, is easily available within India and can be sourced when required, mitigating potential disruptions from these sanctions.