India, Russia agrees to resolve delayed payments related to defence contracts

India, Russia have agreed to resolve delayed payments related to defence contracts while also formalizing a plan for the local production of Russian equipment and spare parts.

As a result of the economic restrictions, India has been unable to make payments to Russia since April 2019.

India has offered a proposal to install an alternative rupee-ruble payment to cover the costs, this was however declined by Russia.

The amount due totals about $3 billion as of April 2023, as reported by Defence News.

Now, the two Governments have achieved a breakthrough, and have agreed on a new plan, under which the Indian Ministry of Defence (MoD) will make payments through Russia’s financial messaging system.

The Financial Messaging System of the Bank of Russia, or SPFS, is an alternative to the Swift system, which supports international financial transfers; several governments have limited Russia’s ability to use Swift.

Indian banks designated by the government are to make pending payments for signed defense contracts between India and the Russian arms export agency Rosoboronexport. If the Russian ruble transactions are blocked, the trade settlement will instead involve Indian rupees.